After a massive 10-Day rally the NASDAQ will look to take a breather. What a big rally we have seen in terms of the amount of days in a row the NASDAQ has been able to climb. Just a few weeks ago many thought we were going to roll over and have a proper correction. While not out of the realm of possibilities we had to listen to our stocks and react according to how they were moving. Had we listened to pundits looking for a tumble we would have lost our edge and our positions and not enjoyed this win streak. Small caps popped into new high territory, but are certainly lacking the oomph here to continue. SPY closed lower on the 17th of July and is only on a 3-day win streak. Positive action for the NASDAQ here, but a rest will be needed.
Do not expect the NASDAQ to continue to run forever. We are going to see a down day. AAII Investor Sentiment Survey showed the number of Bulls jumped to 36% from 28% last week. A big jump, but still not near any extreme. Given where sentiment has been this is a bit of an extreme. Bears dropped to 26% while Neutral stood at 39% (yes, these do not add up to 100 due to rounding). Consolidation is good for markets so long as it is not heavy institutional selling or distribution. We want to avoid leading stocks getting hammered and big distribution days. So far, we have been able to avoid such disaster. It would be nice to keep this market going.
We know bull markets can last quite a while. Longer than shorts can stay solvent that is for sure, but all bull markets end. Whether it is your run of the mill correction or a major crash. These days it seems as if everyone thinks we are going to crash and burn real soon. They may be right. It is why we have our stops in place. There is no need to go unprotected in this market. Our job is to protect our capital at all costs versus trying to maximize profit potential. This eliminates HIGH volatility and eliminates the “risk of ruin.” Better said, we won’t go broke in this market. We have seen where trades lack the discipline and use improper position sizing without stops only to see their account get blown up. There is no need to risk your hard-earned capital to the stock market. Protect it.
We hope you have a tremendous weekend. Go out and enjoy it. Do not waste it. Be safe and have fun.
