This market has been brutal for stock market bulls. We have warned and warned time and again this market and how to always protect your downside risk. The rally from October 2019 was nice in terms of gains, but a correction was always around the corner. No one could have predicted COVID-19 known as the Coronavirus would usher in a global shutdown. However, having a plan to cut your losses through stops and proper position sizing protects you from declines like the one we are currently in. The damage done from the steep decline will likely take some time to repair before we have another sustainable rally. The future is unknown, and we can only take it one step at a time.
We see futures are set to jump at the open as Trump floats a new payroll tax cut. As we see more and more headlines regarding public and private places keeping people home will continue to feed the fear. Politicians trying to stop a market decline is not a surprise, but these markets need to resolve themselves. Most likely given the end of the flu season we will likely see the Coronavirus fade. Vaccines are being tested and we should return to normal. Now, it would be nice if everyone kept the habits of hand washing and covering their mouths when they cough or sneeze. The market will course correct as it is the ultimate pricing mechanism for the economy. We must stay patient and take what the market will give us.
This market will settle down and there will be tremendous opportunity as we proceed. At the end of 2018 we saw the market crater. It was not pretty, and many thought the world was going to end. Yet, we rebounded and pushed higher. Many will try and discredit the market rise as it fits their personal narrative. We do not care. Our job as traders is to ride the trend. Maximize our opportunity to grow our account. This means our opinion matters very little and by no means does it aid us in growing our account. Leave it to the pundits to argue over the reason the stock market is heading in the direction it is.
There will be some adjustment the entire economy will make. No one person is smart enough to figure out the entire impact. Therefore, it is so important to have a process and focus on price action. We do not know when this thing will turn, but when it does, we will have the dry powder necessary to take advantage like we did at the start of 2019. Many were too worried about the market collapsing they missed out on a great opportunity. We will not miss out.
Let’s make sure we are calm, cool, and collected. There is no need to be a hero. There is no need to be in a rush to trade. However, we must stay focused and ready. Good luck out there.
