The subject makes a ‘Star Wars’ reference and now I’m going to build off of that and go directly into a Terminator reference …
The machines are taking over. The only difference is it’s not a physical conflict, it’s a financial battle.
This year July 4th was on a Tuesday which would normally have made for very light volume on the days leading up to long weekend. Instead we saw what is now being dubbed Tech Wreck 2.
Computers were moving money from sector to sector at a pace that humans could not keep up with. One day NVDA is above 150 and the next time you look it’s below 140.
These are powerful, significant moves and they happen very fast. I’m not saying this to scare you out of the market, but there are only certain strategies that will work while others will set you up for failure.
My strategy focuses on the use of ETFs. ETFs are a great way to access a sector without the exposure of an individual stock. As they track a group, they move lower than stocks which means you can profit from the money moving from sector to sector rather than be exposed to it.
It slows down the trading a little bit so you can move at a speed that you can profit from. ETFs also slow you to access previously untraceable opportunities. A great example is TLT.
The iShares 20+ Year Treasury bond ETF looks to track the investment results of an an index composed of U.S. Treasury bonds whose remaining maturity is greater than 20 years. This ETF reacts to jobs numbers and fed announcements.
It recently moved from 122 to just under 128 and then back below 124. For us individual traders, that movement represents opportunity.
We trade the TLT here. There’s a reason why so much money is pouring into ETFs, it’s the best way to trade right now.
More importantly, I believe it provides safety from the next tech wreck or worse. When you see the market rumbling, it’s usually not a one off event.
Step one is paying attention to this rapid sector rotation.
Step two is positioning yourself to profit from it.
If I have your attention, then proceed to step two. Take a quick look at the 3 month charts, in the link above, for AAPL and NVDA and you will see why the individual trader is now craving ETFs.
Adam Mesh is CEO and Founder of The Adam Mesh Trading Group. For the past 18 years he has coached thousands of students to all levels of success in trading. He is also creator of the revolutionary Full Contact Trading.