From the Trading Desk

Big Wave Trading Weekend Update

Price action. Price action. Price action. This is what it is all about. When you consider all the noise the past two weeks, there still has been one consistent piece of data the entire time. If you take a look at a daily chart of the SP-500 or the Nasdaq you can see what that is. Price. Despite all the problems that exist in the geopolitical arena, stock indexes continued to climb higher the past week but more importantly leading individual stocks and my current holdings performed extremely well.

I am currently long the second largest basket of stocks ever in my trading career yet I had fewer trailing sell stops trigger last week than any other week since November 8th. That is the clearest sign yet that what I am doing is working and as long as it is working I will continue to operate the way I am. When it stops working, I’ll stop going long stocks. Until then, signals will be obeyed as 85%+ are working currently. In most markets it will be around 50%-60% so this is a tell to me that the tape is very strong right now.

Despite the strength in the indexes, my current holdings, and new long positions, I am still very nervous “up here.” The wall of worry is indeed in effect post-Trump in the 24-hour news cycle. However, the bullishness is still high overall in the stock market. Investors Intelligence bulls are up to 62%. An extremely high number. The CNN Money Greed&Fear Index is at 60, NAAIM Exposure Index is at 94%, and the IBD put/call ratio is down to .84. Now these numbers are not as extreme and the AAII bulls are lower than the bears but still it is not like the crowd is extremely bearish here.

The biggest problem overall for me is that the 200 day moving averages on all of the major market indexes are still very extended from their current prices. This, along with the potential of a Trump surprise event at any moment, gives me enough caution in the short term that I want to make sure my trailing stops are at points that I can make sure I lock in either major gains, gains, small gains, tiny gains, breakeven, or tiny to very small losses on every position I am currently long. I will not stop buying stocks because of the extension from the 200 DMA. It is just something to be very aware of.

OK everyone. It is Super Bowl weekend and I plan on enjoying myself a little on Sunday. Have a fun safe Super Bowl Sunday. Go Falcons.

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