Bullish With A Chance Of Disaster

2020-06-08 | Simpler Trading Team

The rally continued its run up today supported by retail traders.

Add in a sizable dash of hope for economic recovery and the market is looking like a bull in a curio shop.

What could possibly go wrong?

Market data shows that at the February peak of a powerful bull market, small traders bought to open 7.5 million call option contracts.

Then the Covid 19 pandemic sent the market reeling.

Now the market appears to be looking beyond massive job losses, riots, continued Covid 19 infections, and political turmoil. It seems to see only positive news of the opening of economies and positive job creation.

And traders are chasing the market’s reaction.

Compared to February, small traders were long 12.1 million call option contracts Monday morning — a record for the market.

The market appears determined to grind higher as the speculative frenzy continues.

Traders should keep an eye on exit strategies, i.e. be bullish knowing there is a chance for disaster.

Emotional tendencies wanting to bet big on the rally are reasons for pause. It appears prudent to lean toward the direction of the bullish trend, while noting key internal indicators hit three-year lows today.

The market appears very complacent in this rally environment. Any day could open with the bull sending the curios cascading to the floor.

We’ll continue to run with this rally while monitoring our risk management and planning exits for any sudden turn.

We Saw: Retail traders fueling a continued rally — 

  • All indexes pushing higher to start the week
  • S&P 500 stocks continue to show strength
  • TSLA hit the gas in run toward all-time high

We’re Watching: … squeezes building in key sector stocks —

  • Dow exploding up another 461 points
  • Nasdaq and S&P 500 rising almost 1% each
  • Moves in: EA, MSFT, PTON, NVDA, TSLA

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