As states begin to open back up in a limited capacity the market is looking to digest what the future will look like. MRNA announced positive news regarding their COVID-19 vaccine trials. While a vaccine is months or even years away stock futures reacted positively. QQQs continue to remain supreme among the major index ETFs. IWM continues to be a laggard as money managers focus in on safety. Clustering around a concentrated set of stocks does come with risks. Why our risk management process is so important to control our open risk. As we continue to proceed through this week controlling our risk will be a major factor in our trading. There is no need to get married to one side or another. Given the massive liquidity injection from the Federal Reserve anything is possible.
Best thing we can do is be prepared for anything. With the liquidity the market has been able to stabilize. In addition, we have sentiment on the negative side with AAII Bears continuing to dominate. NAAIM survey shows money managers reduced their exposure week-over-week. Given last week’s decline to start the week it is no wonder why managers were looking to reduce their exposure. Even as states open it will not be like it was prior to the shutdown. Nobody knows what the future will look like and if we ever get back to how we used to operate. How many people feel comfortable jumping on a plane now? There are those who are doing it, but without a vaccine and herd immunity in the US it will be tough to see “normal” again.
QQQs are the only major index ETF above its respective 50 and 200-day moving average. IWM and SPY sit above their 50-day, but their respective 200-day moving averages will present a line of resistance. Stick with your trading plan and do not get overzealous with your trading. We wish you well this week.
