From the Trading Desk

Three Day Rally Ignites Hope of a Bottom

Tuesday’s market action was solid from a price perspective as stocks were able to shake off early losses and close higher. The knock on the session was once again volume came in lower than the previous trading session. It would have been nice to see the market consolidate gains with the light volume. All eyes will be on inflation data set to be released prior to Wednesday’s market open. Higher inflation will certainly mean a more aggressive Fed and rising rates at a faster pace has the chance to spook the bond market. We have rallied off extreme oversold conditions now we will see if we can confirm the market action with a follow-through day.

To erase this attempt at a new rally the market will have undercut the lows we saw on last Friday. Nothing would come as a surprise to use from this market. We are going to take this market signal by signal. There is no rush, but we will focus in on new buy signals as we have been getting them over the past few days. It is a good sign to see new buy signals including add signals. If these new signals start to fail, then we’ll adjust and move forward. However, we are not in the guessing game and will certainly just trade to plan.

We have long gotten over the need to beat the market. So many new traders want to feel the empowerment of being smarter than the market. Most have not realized this is impossible and to win at this game you need a sound plan of action. The formula is not difficult, but the execution is as humans are emotional beings. Emotions can and will hurt your trading at some point unless you operate in a systematic manner. While dealing with the stock market you must remain disciplined in your approach.

Let’s see what Wednesday’s trading brings. For the next week to week and a half we’ll see if buyers have enough to confirm this new market rally.

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