Following Friday’s Russell Rebalance the market witnessed hefty selling to begin the last week of June. Volume wouldn’t eclipse Friday’s level due to the rebalance or reconstitution of all Russell indexes, but price damage was done. Utilities were the safe haven on the session while information technology led the S&P 500 decline. The NASDAQ 100 fell more than 2.2% on the session with the FANGs leading the charge lower. Only AAPL would finish below its 50-day moving average. Small cap stocks were not spared as the Russell 2000 fell almost 1.7%. Weakness ending the month of June is not a surprise. We typically see this type of action heading into the July 4th holiday. July is a good month for returns historical and for the past few years. We’ll take this market one step at a time and will be ready for whatever this market will throw at us.
Go on any market related website and you are going to find very bearish articles. Most are looking for a bear market and warning market participants before it is too late. The issue with this sort of trading is we have seen this story ever since the market decline in 2008 and 2009. We have had some market hiccups like 2011 and even 2015 into the start of 2016. Remember we had Brexit? The market has been relentless to the upside and while we are not going to ignore our downside risk we are not going to act upon a whim. Emotional trading will destroy your account capital. On the flipside, we are going to focus on price action and risk management. If the market is indeed about to begin a bear market so be it. We will be ready. Our process allows us to be on the right side of the market extracting the maximum amount of gains while controlling our risk. Anything else you are simply playing with a ticking time bomb.
The Dow is the obvious index in trouble. Sitting just above its 200-day moving average the Blue Chip index has had a ton of issues lately. Let’s not forget GE was just booted from the index. Trade policies are going to impact, at least in the short-term large multinational companies. We are not going to debate trade policy, but we are going to focus on how the market reacts to any and all “news.” Let’s be clear about what we are saying. Price action is everything and price is a reflection of everything impacting the market. Sound risk management practices which includes where you exit are paramount. We cannot stress this fact enough. To be a great trader, you must focus on your risk management process.
We hope you have a great week of trading.
