The Daily Brief | April 27, 2022

Don’t Jump into a Relief Rally Just Yet

The crazy continues.

After plunging again, the Dow looks to pop about 200 points this morning. All on hopes fear is subsiding, and that all is really ok. It’s not. The economy is a mess. Inflation is only getting worse. Fears of recession are mounting. Your average American consumer is struggling. The situation with Russia isn’t exactly helping. And no one knows what comes next.

If you believe the bottom is in, I have a bridge to sell you.

What investors need to do is wait for confirmation of trend change here. Just because futures are pointing to a 200+ point open means nothing. Wait to see if any new rally is sustainable first. If not, you could get burned by a fake move, as some traders learned the hard way.

At the same time, you also want to hedge for further, potential downside, which you can do with Volatility related ETFs and ETNs, such as:

ProShares Ultra VIX Short-Term Futures ETF (UVXY) – As the VIX pops, so does the UVXY ETF. This ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index.

iPath S&P 500 VIX Short-Term Futures (VXX) – The VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index. The VXX last traded at $25.54 and could see $30.

ProShares VIX Short-Term Futures ETF (VIXY) – ProShares VIX Short-Term Futures ETF provides long exposure to the S&P 500 VIX Short-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. It last traded at $18.99 and could test $25.

Just be patient with this market. Right now, it’s off its rocker.

Trading Tips

Just yesterday, we spoke about President Biden’s announced new “energy efficiency regulations that will phase out old-fashioned incandescent light bulbs, a move that will drive down electricity use and curb greenhouse gas emissions from the country’s power sector,” as noted by CNBC. We share a few ways to trade this news here.

Insider Buying

The Charles Schwab Company (SCHW)

After gapping from about $85 to $68.54, SCHW is technically oversold at double bottom support dating back to September 2021. It’s also oversold on RSI, MACD, and Williams’ %R. In fact, many times, when these three indicators align in oversold territory, it tends to bounce.

Helping, CEO Walter Bettinger has been busy buying stock. On April 25, he picked up 36,640 shares at $69.39 a share. On April 26, he bought 26,108 shares for $68.55 a share.

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