Given the world is still in a pandemic this market is trying to find its way. Friday’s decline was noteworthy and showing two large distribution days should give traders pause on the current state of the market. The NASDAQ has 3 days of notable distribution in the past few weeks as the index wrestles with its 10-day moving average. S&P 500 sits just below its 200-day moving average but is maintaining June’s low for the month. The rise in coronavirus cases has reignited fears the economy will be shut down once again. The future is unknown and while we wish for a different market it is unlikely, we will get it. The cards dealt are the ones we play with and we will do our best to maximize our profitability. Summer trading is certainly interesting and has been for the better part of the last decade. Stay the course and remove your emotions from your trading.
The correction from middle of February to the end of March was not long, but swift. We witnessed the market coming to grips with a pandemic and a total shutdown of the world’s economy. What did many expect the market to do? As the market slid further the Federal Reserve stepped up providing a backstop for the equity markets through their operations. Right, wrong, or indifferent the liquidity provided the market the ability to climb from its hole. Where we go from here is anyone’s best guess. It is summer after all and it would not surprise us if this market slides a bit further into July.
Sentiment remains bearish from the AAII survey respondents. Bulls are in the low 20s while Bears are reaching 50%. NAAIM Exposure index is in the high 70s. Hard to imagine with the market coming off the lows we would see so many bears. Given the headlines we see and news cycle it is no wonder the retail crowd is bearish. We cannot blame them as we see a few states spike with SARS-COV-2 cases. This virus has created a lot of problems, but within the market there have been some nice wins. It is best to pay attention to price action than news headlines. They are paid by ad dollars and the more eyes they can get glued to them the more money they make.
We hope you have a great week, albeit shortened of trading. Keep grinding and those losses small.
