Ask and you shall receive. Bulls prayers were answered with the market jumping higher on big volume. QQQ and SPY leapt above their 50-day moving averages with support is a good sign this market can move higher. US and China are set to meet in October and this news likely helped investors and traders alike to push back into stocks. IWM had a solid day but failed to close out strong. The 50-day moving average proved to be too much for the ETF. Friday we will get a read on the August job report. While not as important in the past it may seem, we should see the market react one way or another to the release. A solid day for the markets on Thursday overall and proves why you must always be in the game.
When we trade on emotion we tend to look past the obvious and focus on the worse possible outcome. Many traders miss days like Thursday and gains overall because they are too worried about what might happen. Our risk management strategy is to alleviate this worry all together. Even the greatest looking trade may fail. New and old traders a like need to get used to the notion they will have trades that do not work out. It is part of trading. Deploying a sound risk management strategy allows us to take advantage upside with confidence. We fully expect some trades to not work out and it is okay they do not. Be prepared.
While the AAII Sentiment survey remained bearish the NAAIM index remained in the 50s for the second week in a row. Active managers week over week reduced, slightly their exposure to the equity market. After yesterday’s session we doubt exposure will remain in the 50s. If you missed Thursday’s move do not worry you missed it along with many active managers. If you control your risk, there is nothing to be afraid of in this market.
Our focus will continue to be on how the market moves. Price is always our guide not what we think might happen. The move back above the 50-day was a strong indicator to us. September and October remain a headwind for this market, but we will see how it goes. Our position sizes and exits are on point to maximize our upside while protecting our downside risk. The formula is not complicated, but so many simply cannot follow. This is not new or groundbreaking.
We hope you have a great weekend. The unofficial start to fall has begun. Get out and enjoy the weekend.
