March 24, 2016
Roger Scott, one of our top contributors, just revealed what he believes is the impact of the trade war between the U.S. and China on the markets and we just had to share this with you.
Roger wants traders to realize that the number one catalyst driving stock prices is the global economy which can be divided into the currency and interest rate. The trade war with China is more impactful than most might believe.
The Chinese and U.S. currencies are in big entanglements and this wont be resolved for maybe another quarter or two.
Ultimately, the markets are and will be moving sideways until the trade war ceases. There might be some upward bias but nothing spectacular will happen.
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The Dow is also going along with this prediction. It is moving up and down within a tight range. The 200 day moving average is about 25,140, give or take a few points, while the support is right at the major 25,000 level. Major resistance is slightly above 26,000. Roger predicts that stocks will fluctuate between 25,000 and 26,000.
Considering all of this, the markets are defensive and traders should focus their efforts on sectors that have little to no correlation with China.
Three sectors to focus on are Utilities, Real Estate and Health Care. These sectors are making all time highs. Be sure to keep an eye on explosive stock movements within these sectors.
The sectors with the best risk to reward ratio are Real Estate and Utilities. Look out for Duke Energy (DUK) and AvalonBay Communities Inc. (AVB). Both stocks are showing very stable parameters with low volatility which make it key times to invest.
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