Wednesday was a banner day for the stock market yesterday with hefty price gains supported by strong volume. It helped we had AAPL earnings and the Fed to assist with volume. However, strong price gains are nice to see and odds of the major market indexes testing their respective 200-day moving averages is quite high. The Fed signaled rate hikes are not around the corner and odds favor a rate cut over the next year than a hike. After-hours FB reported better than expected numbers and the stock is set to open higher. AAPL was able to regain its 50-day post earnings. Not a bad session for this stock market. The downside was the gross underperformance of the Russell 2000. This market won’t let us have it all. While it is great to have solid price gains we cannot ignore maintaining discipline with our risk management process. Stay focused and discipline.
Earnings will continue to be a main topic of market pundits. So far, so good with price action from this market and earnings. There is life in plenty of names and we continue to see solid buy points. Most will try and focus on whether this is a new bull market or continuation of a cyclical bull. It really doesn’t matter in the end. As long as your focus remains on the leading stocks, cutting losses, proper position sizing, and profit taking you will have great success no matter what the stock market is doing. So many traders get caught up with trying to be “right” about the direction rather than focusing on price and risk. Do not make the rookie mistake. Focus on what matters and what is in your control.
AAII survey shifted to the neutral camp as Bulls and Bears dropped to 31.76% respectively. Given the rise off the lows this behavior is not surprising at all. We would not expect us to return to any bearish extreme any time soon if this market rally continues on its current path. The only thing that would be a watch point is how fast Bears return if we do end up reversing course. No sense in worrying about something that may not happen. Continue to shift your focus on the right things.
We would love to see the Russell 2000 to come roaring back to life leading the charge higher. We hope you have had a great week of trading so far this week. Have a great trading session today and get out and enjoy the weekend!
