Why You Should Be Cautious About This Week’s Trade

Every trader should have a gut.

You can look at as much data as you want, but you still need to have a “gut feeling” about the market or a stock.

And that’s coming from a quantitative analyst that has spent the last 25 years tearing apart thousands upon thousands of data sets on the market.

Here’s what my gut is telling me this week: sit back and watch… but do it with a cautious eye.

This week’s inauguration and the beginning of the cabinet approval process are hardly “market movers.”

Sure, we’ve got the potential for some social disturbances through the week. Tensions are high at all levels. But it seems like the government is prepared for several outcomes. That’s their job, after all.

Of course, the market will breathe a little sigh of relief after a peaceful transition tomorrow.

That said, there’s something else lurking out there that we need to watch closely.

Most people will be watching the inauguration. But this is the real reason I’m cautious about this week’s trade… and why you should be too.

Volatility is ready to hit this market like a wrecking ball.

Here’s why – and how to protect yourself from the fallout…

Your Weekend Watchlist: 22 Stocks to Watch This Week

The iShares Global Clean Energy ETF (Nasdaq:ICLN) and the Invesco Solar ETF (NYSEarca:TAN) – two of my top ETFs for the year – turned in negative performances last week.

As an investor, you may be wondering if now’s the time to start moving away from the clean energy sectors of the market…

But I’m here to tell you that that would be a big mistake.

The drop is simply what I like to call a “herding cats market.” We’re seeing correlation drop in the sector over the short-term, which is really just a fancy way of saying that the sector isn’t moving together – kind of like what would happen if you tried to herd cats.

Instead, you’ve got a handful of stocks rallying to new highs while others are selling off.

Below, I’ve put together an alternative energy watchlist. This chart breaks down the weekly performance of the larger companies in each these two sectors:

Note the difference between the top and bottom performers. The wide range in this sector indicates the volatility within these stocks.

You know what that means, right?

Volatility in a bullish sector means there are opportunities to be found. You just need to take a closer look at the stocks at each end of the spectrum.

Here are the top three profit opportunities in your weekend watchlist…