It has been one heck of a week for stocks. Monday’s reversal was on the back of Trump tweeting about Latin American Steel tariffs. News reading algos are certainly keen on anything regarding new tariffs. After Tuesday’s opening, the stock market has done a decent job clawing back most of the move lower. While IWM lost ground from its breakout over the past few days has seen nice gains leading the market higher after Tuesday’s morning panic. A good sign for stock market bulls. Where the stock market goes from here is anyone’s best guess. Obviously, Tuesday morning’s low will be an important level to keep an eye on as we proceed. Further distribution will be something to keep an eye on along with leading stocks. Will this week’s action be a sign of weakness or simply end up being a small period of consolidation? Regardless of direction we will continue to work our risk management process and continue to grind away.
Some people are calling the recent move a blow off top for this rally. Not exactly sure we would categorize the latest move as a blow off, but anything is possible. A blow off top we would expect to see many stocks moving more than just 10% in a few days. We would have stocks doubling in a matter of weeks, not years. This market really hasn’t coughed up winners like in past bull markets had have made growth investors work much harder to find the diamonds in the rough. Big Wave Trading we do find stocks that can move, but it certainly isn’t an easy game to play. We cut our laggards and stick with our winners. While watching our portfolios grow this game isn’t meant for those who aren’t willing to take the time to master their craft. Nothing will be handed to you and you must be willing to put in the time to be a better trader.
AAII sentiment was little changed week over week. Perhaps the Thanksgiving holiday had something to do with it, but we did see the number of investors respond as Neutral grow. Those who responded as Neutral grew 3.1 points to 39.2%. A high number of investors without an opinion on where the market is headed next. Bulls dropped 1.9 points to 31.7% and Bears dropped 1.1 points to 29.1%. The crowd simply does not think this market will do anything over the next 6 months. Given we have over 3 trillion in Money Market accounts it is hard to imagine the stock market wouldn’t get support. Never mind with might happen as we will simply interpret the price action as it happens. We are not in the prediction business anyway.
Continue to work your risk management process and sticking with Big Wave Trading. We will help guide you through this market no matter where it decides to go!
