Yesterday the broad stock market soared upwards mostly driven by the winding down of impeachment rhetoric as President Trump is expected to be acquitted of impeachment charges in the Senate today. The State of the Union address just a day before a near certain acquittal has given Mr. Trump a victorious energy that was likely adding a bullish energy to yesterday's equity markets (Wall Street likes this President).
This bullish surge has placed our short NASDAQ position a bit in the red. (If you are shorting the DOW or S&P 500, you are about break-even now on the trade). Because the NASDAQ is making a new all-time high today while the S&P 500 and DOW are not, we are getting an intermarket bearish divergence signal, and we are in a new reversal zone (Feb. 4 - 13). This means the market could top out and turn down here. Because the President's acquittal is highly anticipated, it could already be factored into yesterday's (and possibly today's) rally, and we could see a "sell on the news" reversal today. I am still holding my short position in the NASDAQ, but if this rally goes much higher today, and especially if the DOW and S&P 500 make new all-time highs, I will be ready to bail out (cover) my short position.
Traders should stay tuned for a possible trade alert.