Monday kicked off the week with new all-time highs with the exception of the Dow Jones Industrial Average. The Dow has yet to eclipse its high from the26th of January earlier this year. Volume was about average and higher than Friday’s, but not overwhelming by any stretch of the imagination. Small cap stocks inched higher, but the group had already kicked into new high territory last week the big indexes are still playing catch up. News of a trade deal with Mexico helped ease fears over trade wars. China is obviously the big elephant in the room with regards to trade, but as we have seen with Mexico and Europe fears over trade wars have subsided. We are not fortune tellers and will not try and predict what the market will do next. Price action of the market is signaling, despite seasonality it wants to continue to push higher. The market is not something we want to combat. It is in our best interest to stay with the prevailing trend and see where it takes us.
While this market appears it wants to continue moving higher it does not mean we ignore our trading rules and not use stops. It is fantastic this market wants to continue this bull market run, but we must maintain our discipline as to maximize our profit potential and walling off our downside risk. There is no telling if the market will make a turn for the worse at any moment and our stops will be what protect us while allowing us to capture plenty of upside. If you have not figured out a proper risk management strategy yet you are putting your hard earned capital at risk.
Crypto currencies have lost quite a bit of luster after going on a monster run at the end of last year. Bitcoin just recaptured its 50-day moving average and appears to have strong support at 6,000. Something to keep an eye on as the digital asset resolves its massive run up from last year. Given the support it would not surprise us to see BTC race back towards its 200-day moving average or even 10,000. As always, if you plan on trading you must have an exit plan along with a proper position size.
Earnings season showed earnings growth as well as stock buybacks are alive and well. Yes, the top usually comes when earnings are at the best. However, it is quite difficult to know the following quarter won’t be as good as the last. Risks still surround this market, but with a proper plan in place we have the confidence we’ll extract every bit of gains we can from this market.
