The panic over the Coronavirus has subsided as stocks have recovered their losses. Small Caps are still struggling to keep pace with the large cap stock indexes. Whatever the reason maybe we still see the group as a whole lag the entire market. We have no idea if or when we will see small caps lead again. Our focus will remain on the leading stocks. There is no need to focus on weakness. Futures are pointing to another positive open for the stock market. We did not just sell everything and run for the hills like many of the Twitter gurus did. Trading on your opinion and/or emotion will only lead to missed opportunity and worse heavy losses. Our opinions do not matter to the market. This market continues to prove this time and time again. Get on board or be left behind. This market is relentless and looking to fool as many people as possible.
Last week we saw the stock market pull in after a long run up. It is nice to get a consolidation period to help stocks digest gains. We cannot force the market to do what we want. All we can do is follow our trading process and see where the market takes us next. Many will try and convince you they know where the market is heading and will do their best to sell you their opinion. However, when it is all said and done, they will ultimately lag. No need to follow someone who is flying by the seat of their pants. Effectively, when you are acting on your opinion you are just trading from the hip. This is no way to make gains in this market over the long-term.
Sentiment has not changed much from last week. AAII closing Wednesday showed Bulls gain 1.9% to 33.9% for the week. Bears dropped 1.6% to 35.2%. Even with the slight recovery sentiment did not change very much week over week. Not too much of a surprise given the fragility of the individual investor. We still have not seen sentiment get too extreme in any direction for some time. Late 2018 we saw Bears near extremes, but we have not seen Bulls get into extreme levels in the AAII survey. Perhaps at some point we will, but for now the crowd is still apprehensive.
There are a lot of factors to be cautious over with this market, but none of them should be apart of your trading process. Stick to price and Big Wave Trading to get you maximizing your trading potential.
