From the Trading Desk

Market continues to Run Higher

Despite the government shutdown lasting 69 hours the market was able to reverse early losses and close higher. Volume was mixed with NASDAQ volume moving higher while falling on the NYSE. After-hours a FANG stock reported earnings and is pushing higher in pre-market. Again, other than anecdotal data there is no indication from price action we are on the cusp of anything sinister. We know valuations are stretched and there is a lack of any resemblance of a correction. We continue to see positive price action and continue to be long this market. At some point, we will get something a bit more sinister. However, we are not about to give up gains. Our stops are in place to control risk as well as our position sizes are in check.

NFLX gapped higher on the first day trading of the year. Those who bought at the open are sitting on some nice gains. Hard to hold thru earnings, but with a cushion and proper position sizing holding through earnings is a bit easier. It is important to know when holdings are reporting earnings. Controlling risk is paramount in this type of environment and really any environment. While we have enjoyed great gains from this rally we are not about to get overconfident. Pigs do get slaughtered. A sound risk management process is very important. Position sizing and exits are more important than simply where you enter. Keep grinding.

The lack of volatility is something else too. While not unprecedented we simply have not seen any expectation future volatility will increase. Investors believe this low volatility environment will continue for quite some time. No need to try and pick when volatility will return. Stick with the plan. Execute.

We hope you have a great week of trading!

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