Following the worst Christmas Eve trading day ever the market produced one of the best day of gains ever. If this trading doesn’t scream bear market trading we don’t know what does at this point. The opportunities are certainly with intraday trades. The long side of the market from an end-of-day perspective is a ways away from producing a decent rally from where we stand today. There is always a potential, but given the market action it’s likely to be a tough go. We will continue to focus on price action and control our risk. We want to make sure we have dry powder in place for when this market does find solid ground to rally from. Stay patient and use this time to study!
The toughest part of writing stock market commentary in volatile bear markets is finding stocks to write about that most miss. TEAM is a stock holding up very well here, but every stock market blogger, commentators are all over this name. This name is one to watch, but knowing how to handle it is where you need a plan. Proper position size along with an exit plan is paramount. Stocks like TEAM in this type of environment run the risk of failure higher than within a bull market. Buyer beware and always trade with a proper risk management strategy suiting your risk tolerance.
We do expect the volatility to continue as this market tries to find a short-term bottom at the very least. An interesting development from the AAII sentiment survey was the number of Bulls and not the high level of Bears. Bulls ended the week at 31.5% a jump of nearly 7%. Bears ended the week at 50.3% a jump of 3%. Neutral responders plummeted to 18.2%. Sentiment has been quite bearish from AAII and NAAIM members and its not a surprise. Small caps are nearly 30% off their 2018 highs. We’d be a bit worried if there weren’t many bears. Do not be surprised if we see this market bounce over the next few weeks.
This is a very interesting market! Stay disciplined and as always cut your losses!
