Volatility still remains as stocks enjoy a wild ride on Monday. Volume was lower on the session; good sign institutions were not selling stock. After the V-shaped nature of the rally a day like Monday is not out of the question. The bad news was the S&P 500 fell below its 50 day moving average along with the Dow Jones Industrial Average. WMT fell more than 10% on the session as earnings disappointed. AMZN has done a fabulous job competing with WMT and when comparing both stock prices it is easy to see who the clear winner is. We are not keen on V-shaped ramps, but it is the character of the stock market at the moment. Our focus remains on our risk management process as this market looks to resolve the recent move off the lows.
This market really can go in any direction. We could look better and we could look a lot worse. A few days of quiet consolidation at these levels would go a long way. Coming off deeply overbought and oversold conditions it would be great if the market could rest. Consolidation is a great way to work through volatility. We have very little interest in what most have to say about the market. All we care about is what price action is doing. Everything else is useless.
What we are looking to do here is to continue to manage our risk. There is no need to trade like a hero in any environment especially this one. Volatility is up and it will certainly be helpful in producing bigger returns than we have seen. Patience is also a key here as we may not return to new highs for a while where last year it was everyday we’d see a new one. Stay disciplined and focus on what really matters in this market.
