Last week was we saw volatility kick up and stocks experience a slight hiccup. Small cap stocks saw their breakout reverse at the start of the week only to see them finish near the high of the week. SPY, QQQ, and IWM all finished at their top of the range for the week. A good sign for the uptrend as buyers were able to defend their turf. Last Tuesday’s low will certainly be a point to watch as it is the most near-term trading point, we’ll watch over the next few weeks. There is always the possibility of Trump tweeting something and the market reacting, but there is no way anyone can anticipate. The overall trend is in the bull’s favor and will remain so until we see evidence pile up. So far, no matter how “tough” this market might be the trend is our friends. Keep the emotion out of your trading and focus in on what truly matters: Price.
We continue to see active managers hold back with their equity exposure. For the fourth straight week in a row active money managers were under 80% allocated to equities. Beginning of November, the average allocation was 92.26%. Last week’s allocation was just 77.80%. So much for exuberance from market participants. We know AAII continues to be dominated by neutral respondents. In the end, despite QQQ and SPY at all time highs the average investor simply isn’t getting on board. This certainly isn’t like what we saw in the late 90s. The sting of the 2008-09 bear market still has an impact as many are afraid, we will see another.
The best thing we can do is to focus in on our winning stocks. There is no need to be a hero, but it is another to sit out this market entirely. We have had a few subscribers say to us this market is no good and are going to sit on the sidelines. In early 2008 we had so many new subscribers coming out of the woodwork looking to trade stocks. It is very interesting how the trader has evolved since then.
AAPL remains king of the big cap technology stocks. GOOGL is trying to keep pace, but AMZN, FB, and NFLX are still struggling to remain relevant. FB is close to a breakout but has yet to see the support to push it higher. NFLX continues to face huge competition. AMZN despite cyber Monday and cyber week still cannot get out of its own way. There are plenty of other opportunities out there if you are willing to put aside your emotions. IBB is another interesting ETF and one to watch. Whatever this market wants to throw at us we will do whatever it takes to maximize our opportunity.
Have a great trading week!
