From the Trading Desk

Big Wave Trading Weekend Update

A quiet session on Monday with a bullish intraday reversal, strong sessions on Tuesday and Wednesday on heavier volume, followed by quiet consolidations on lower volume on Thursday and Friday. When you are already fully invested, it doesn’t get much better than that. To say that the past week of trading was healthy overall is definitely an understatement. Very little went wrong and everything seemed to go right when it came to the market and my personal holdings.

This was definitely not quite what I expected following the Presidential transition but it was definitely welcomed. Coming into the past week bullish sentiment has been running pretty hot overall. However, despite the new highs this week and the overall positive price action, bullishness actually seemed to subside the past week. More than likely, due to the 24 hour news cycle more than anything else. While sentiment is still not ideal on my end, its good to see that we are still not too extreme.

The AAII bulls fell significantly the past week down to 32% with bears standing at 33% and neutral at 35%. So right now 68% of investors are stating that they are either bearish or neutral on the market. With the market hitting new highs, that is about as contrarian as it can get. Now the II bulls came down a little too but overall it is still very frothy at 58% with bears only at 17.5%. Still bears did rise and bulls did fall. The CNN Money Greed&Fear Index is at 59 which is technically “greedy” but far away from 100. NAAIM Exposure Index is at 99.28% which is high but not at the max 200%. Then there is the IBD Put/Call ratio which is at .95 showcasing a little fear while the VIX is at 10.58 indicating complacency.

So as you can see, it is a little mixed but still overall appears to be favorable to those invested on the long side currently. Now, if you are still heavily in cash or god forbid still attempting to short a market hitting new highs and you are thinking about getting fully long here, well you might want to calm down a tad. Major market averages like the DJIA and RUT are still very extended from their 200 day moving averages (chart below) and have not seen a lot of volatility post-election. If we continue to melt higher with bullish sentiment growing we increase the odds of a severe adverse price decline.

rut

This is why it is always important to follow a well laid out plan like the EOD and intraday trading methodologies that I employ here. Every trade is well thought out, carefully considered, and then executed on my end. Never chase a move, especially in an extended market with bullish sentiment, and always obey your stops. Do those two things consistently and with proper money management in time you will be successful. It is not easy but it never pays to trade based on your personal emotions. If I traded like that, I never would have even been along for this ride post-Brexit. Obey your rules.

If you have any questions or suggestions whatsoever, please feel free to leave feedback below. I look forward to hearing from you. Remember, you can trade these positions based on the capital recommendations below or you can invest anyway you want with any of the positions below using as much or less capital as you want. Just obey those stops! That is the only non-negotiable situation. Right now, everything is working, but one day everything will start reversing and without proper stops you risk losing your hard earned gains. Don’t let that happen.

Enjoy the rest of your weekend and I’ll see you either in the chat room or back here on Monday. Aloha nui.

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