A terrible reading from the Empire Manufacturing survey sent stock futures lower. Early morning weakness would give way to buyers as a slow “melt up” would lift the NASDAQ Composite and S&P 500 back above their respective 50 day moving averages. Volume was mixed on the session with the NASDAQ seeing an increase in trade over Friday’s level. Economic data may be dismal, but it has not stopped this market from trading like we are in a recession. Earnings have been a complete disappointment as well. Despite earnings season being disappointing the market has held up relatively well. We certainly have a ways to go and a broadening of leadership needs to occur if we are to see a sustained rally. So far this year it has been nothing but starts and stops. Continue to manage risk and cutting laggards. Stick with winners.
There are quite a few traders who are quite confused about the current state of the markets. We can simply point to the AAII investor sentiment survey and see how many have been stuck in neutral. NAAIM survey showed many active managers reduced their long exposure just last week. A choppy market is one where mean reversion strategies favor the trend following ones. It does not mean trend following is dead. In the long run Trend Following will win out and on individual stocks it works fabulously. Especially if you continue to rotate into winning stocks and cutting losers. We are not in this game for charity. We are here to maximize our profit potential!
We do have a few new longs tonight. Not surprising given the rally today. Will it turn into a brand new confirmed rally or simply falter like all the others. Time will tell and we are ready for whatever this market can throw at us. As long as we manage our trading signals and position sizes we can handle any market.
Cut those losses short.
