To the surprise of many this market continues to find support. We may also point to the extreme low in volatility. Looking at the VIX we can see the option traders simply do not see volatility picking up over the next month or is it no one is buying protection because it has been a losing proposition? Led by big cap technology stocks the NASDAQ 100 continues to be the biggest winner. AAPL, AMZN, GOOGL, and FB all continue to be at or near all-time highs. There are always faults we can find with the market, but the end all be all is price. Regardless of your opinion regarding multiples and/or geopolitical risks all that matters are your risk and price action. Control what is in your control rather than worry about meaningless thought exercises when it comes to your trading. Cut those losses short and ride your winners.
Sentiment continues to lack any extremes except for one. The AAII Sentiment reading showed bulls and bears relatively tied. Slightly more bulls than bears, but only separated by 3 percentage points. Those who are neutral topped both at 37% most since prior to the election. Are traders/investors using cash rather than hedging strategies to protect their downside? Is this the cause of the VIX to be at decade lows? Perhaps, we will never know the true answer and while it may appear fun to know in the grand scheme it is meaningless. NAAIM Active managers are still bullish with the exposure index above 90%. There were no bearish bets the last two weeks. Perhaps, active managers are following along the same strategy individual investors are deploying: CASH.
Getting to cash has been used by the trading greats of the past. The list is long, but going to cash is an acceptable approach to reduce your risk to the market. Getting to cash isn’t something you do simply because you think the market is going to crash because of the POTUS. Decision making based upon pure emotion is simply not a wise endeavor leading to your hard-earned capital to be flushed down the drain. Avoid the common pitfalls of bad traders. Stick to price and cut those losses short.
We hope you had a great week and we wish all the mothers out there a great Mother’s Day weekend!
