A solid trading session Wednesday with the NASDAQ leading with a 1% move to the upside. It was a good sign to see the Dow and S&P 500 recapture their 50-day moving average. Volume was not overwhelming to say the least, but we did see positive price action. We would have rather see the market show us a ton of volume flooding into stocks. Perhaps we are in a new paradigm with electronic trading. Price dictates our operations and not whether or not electronic trading is completely taking over the market. We need to keep focus on price and our risk management process. Focusing on anything else would only lead us down a path of destruction of our capital. There is no chance we want to reduce our ability to participate in this market. Where we are now is in a good spot for this market to continue to work its way higher. Stops are in place to protect any downside if we are to roll over.
Where we go from here is anyone’s best guess. Right now it appears we are going to march higher. Our portfolio reflects the current market state as nearly fully invested. The next Federal Reserve meeting is on the 13th of June where the central bank is expected to raise rates another quarter point again. The bank continues to raise rates as they fear inflation will rear its ugly head. So far we continue to see a flattening yield curve especially with the 7s and 10s. However, we have not seen the yield curve flattening just yet. It could and before the next recession will likely invert. Until such time we will stay focused on how the market reacts and manage our holdings in accordance to our trading plan. Anything else is simply hero ball and we will not partake.
Sentiment continues to favor those who are neutral. Cash is sitting on the sidelines at the moment as many are trading scared. They are worried about the next market crash. If its geopolitics or something else they are sitting on the sidelines. We are not interested in cocktail party talk only price action. If we were focused on how the market would react to certain events we would not be sitting on the gains we have. Our ability to extract gains from this market comes from completely ignoring the noise and truly focusing in on our stocks. It is an easy formula, but very difficult to implement. It is why so many fail. No need to fail with Big Wave Trading.
We hope your trading week is going well and as always cut those losses.
