Monday’s session was a good way to start the week. We are not out of the woods by any stretch of the imagination, but a good way to start the week. For now, the major indexes are holding October lows and it is a relatively good sign we are seeing support for the time being. Given the past two months of trading we are still in defensive mode and will need this market to prove itself to us with solid price action. Until such a time we will remain patient for greener pastures.
Last week sentiment readings from AAII and exposure index from NAAIM show quite a bit Of fear. II survey of course showed bears barely inching higher. It has been a long while since the bears were much above 20%. However, given we do see a high number of bears in the AAII survey and lack of exposure to equities in the NAAIM exposure index a small rally would not surprise us in the least. If we were to rally our risk management process would ensure we’d maximize our profit potential while keeping our losses to a minimum!!
The next Fed meeting is still a few weeks away and odd still favor a rate hike. Conventional thinking may prevail here and we should see stocks react negatively to another rate hike. It is likely the Fed will go too far with the potential of kicking off a recsssion in the US for the first time since the “Great Recession.” If we were following normal historical norms we would have already seen a recession, but since the Fed held rates at 0% for so long and pumped $3T into the economy its no wonder why we haven’t seen a recession. In the end, all we can focus on is our stocks and their price action. Of course our risk management process is key too.
We hope you have a very profitable week!
