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Dow Hits New High Despite Choppy Session

We were set for another spectacular day of all-time highs on Wednesday…and then the bottom dropped out. The major indices managed to come off their lows by the closing bell, but two of them still finished in the red. We had to settle for only one new record today.

The Dow advanced 0.16% (or about 41 points) to 26,252.1. That marks the latest closing high for the index, but at one point today it was up well over 100 points. The NASDAQ dropped 0.61% to 7415.1 and the S&P was off 0.06% to 2837.5. It was a reversal of yesterday’s session, which saw the NASDAQ and S&P reach new highs while the Dow lost ground.

There’s certainly some nervousness as President Trump heads to Davos for a speech Friday, especially with all the talks recently about trade, tariffs and NAFTA. However, as Counterstrike mentions in the highlights section, the biggest cause for today’s sluggishness may have just been “gravity” (see more below).

Also in the portfolios on Wednesday, Options Trader made a couple of bearish moves on stocks with weak Zacks Ranks and troubling chart patterns. Also, Home Run Investor picked up a new position from the highly-ranked trucking industry.

Today's Portfolio Highlights:

Options Trader: As you probably already know, Kevin expects the market to double over the next four years. But such a bullish stance doesn’t mean he can’t use his options expertise to make a bearish bet every now and then. On Wednesday, the editor made these two moves:

• Added 2 bear put spreads in Skyworks Solutions (SWKS), a key company in the Internet of Things. In addition to being a Zacks Rank #4 (Sell), this stock also has a bearish flagging pattern on its chart that suggests a downside breakout to come. If SWKS closes at or below $92.50 by mid-May, each option has profit potential of 138%.

• Added 3 bear put spreads in Public Storage (PSA), which is also a Zacks Rank #4 and has a Zacks VGM Score of “D”. The stock has a bearish descending triangle pattern on its chart, suggesting more downside could be on the way. If PSA closes at or below $185 by mid-June, then each of these options would see potential profit of 163%.

Read the full write-up for specifics on both of these moves.

Home Run Investor: The trucking industry is in the top 6% of the Zacks Industry Rank with the 16th spot out of 265. Brian Bolan found a Zacks Rank #1 (Strong Buy) from this space that’s moving in the right direction. Saia (SAIA) is a leading multi-regional less-than-truckload carrier that was added to the portfolio on Wednesday. The company reports on February 2 and has a Zacks Style Score of “A” for growth. Earnings estimates for 2018 have climbed to $3.09 from $2.77 in the past 3 months. Read the complete commentary for a lot more on this new addition.

Counterstrike: “Stocks sold off today on no headline, but rather because it was just time. Good ole profit taking after the market has ripped almost every day this year. While the S&P did see a nice 30 handle sell off, damage was minimized with an afternoon rally.

”It’s about dang time we saw some selling. The S&P has now set a record for amount of days without a sell off of over 5%. If I had to give a reason for the selling today, I would refer you to Isaac Newton and his theory gravitation. What goes up must come down and that’s what happened today.

“Today’s small move lower felt huge, as we just aren’t used to the market going lower. Can u imagine what a 2% sell off would look like? It would feel like the world was ending….some of you might joke, the world would have to end for the market to fall 2%.”
– Jeremy Mullin 


Surprise Trader: "It’s almost comical investing in these markets. The funniest part to me is that when we actually have a down day in the market, it feels strange. It’s almost as if it’s not supposed to happen. And today can only loosely be characterized as a down day because it wasn’t even all the major market averages in the red. 

"Remember folks, this is earnings season and that means we are supposed to chop around a little bit. Take the selling as an opportunity to shop for stocks on sale. 

"No reason for alarm here with the NASDAQ as the index took a small step back. Honestly, I’d like to see the market give up a little more ground to help me gain exposure to some overheated industries. So far earnings season really is rocking and rolling and the next several quarters still look great." -- Dave Bartosiak, who also heads the Momentum Trader. 

Until Tomorrow,
Jim Giaquinto

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