This market is not as clean as we’d like it to be given we are hitting all-time highs. Things are not all that bad out there, but they could be a lot better. Monday’s action was okay for the most part with indexes rallying off their lows. Volume would not come close to the options expiry volume. However, it was respectable. Weighing down the S&P 500 were in order of magnitude Real Estate, Consumer Staples, Materials and Industrials. The only positive sectors were Energy, Information Technology, and Health Care. It was nice to see the NASDAQ fight off early sellers to close the session positive. We are nearing the end of negative seasonality and it will be interesting to see how the market reacts to another rate hike as well as the upcoming elections. All we can do is sit back and react to the action.
How continued rate hikes will impact the economy and the stock market is anyone’s guess. We do know historically the Federal Reserve Bank usually hikes too much. There are still lots of articles pointing out the pending doom ahead of us, but really no one knows what the next market correction will look like. It has been 10 years since the last recession and the current economy is not like others. By now, we should have seen at least a modest recession. Yet, somehow we have avoided back-to-back quarters of negative GDP growth. Economists and traders alike will try and pin point the next one, but those who have tried continue to be proven wrong. Let’s just sit back and wait for the market action to tell us there is trouble ahead.
At this very moment we have key moving averages holding well-established moving averages including key points of support. Any change in this situation would certainly raise our eyebrows and most certainly be triggering stop losses. Knowing how much to trade and where your exit(s) are is the most important piece of trading. What you are risking is key to profitable trading. If you are unable to quantify your current risk to the market you need to re-evaluate your trading plan. You must be able to know how much you are risking at any given moment. Otherwise, you will end up causing tremendous harm to your trading account. Whether you are risk adverse or not knowing how much is at stake should be your number one priority. Risk management matters!
We hope you have a great trading week!
