Yesterday’s drop on the news of capital gains tax hikes woke everyone up. It was crystal clear on the charts that traders don’t like the idea and the selling frenzy began.
We will have to watch what happens today and next week to get a good sense of this. Will the selling continue? Will the proposal get chewed up on it’s way through DC?
The immediate effect is undeniable though. Look at the chart of the Dow yesterday and then let’s see if we can spot where that money went.
We can see the flood gate open on the announcement and money starting to pour out.
Now look at the chart of AGG (an ETF of the aggregate bond market):
This could be a good clue as to what is on the other end of the teeter-totter. The announcement is pretty fresh and it isn’t unlike traders to sell first and ask questions later so we will be watching to see how this plays out.
These type of moves are classic momentum plays and the exhaustion set up that Lee Gettess uses is a great tool for confirming these reversals.
Momentum Trading with Precision is a must-have guide. Grab it here and make sure you are ready as things shift.
Keep learning and trade wisely,
Market Wealth Daily