Get Picky With Trade Setups In ‘Violent Chop’

2020-09-09

After consecutive days of selling that spanned the three-day holiday, the stock market rebounded for a strong rally Wednesday.

The Dow spiked to 27,940.47 points to rise 1.6% (gaining back 439.58 points on the day). The Nasdaq rose to 11,141.56 points for a 2.71% rebound while the S&P 500 rallied 2.01% to 3,398.96 points.

Fueled by technology stocks — including an almost 11% gain in TSLA — the uptick was a reprieve from days of heavy selling. The Dow at one point in the session was up more than 700 points.

Simpler’s traders avoided participating in the heavy mid-week buying, leaning toward caution in a market that has changed its character.

The extended uptrend momentum looks to be replaced with an expectation of multiple months of violent chop ahead.

Traders are still looking for higher moves with a cautious look over their shoulder. Another flush could happen quickly and might be news driven, i.e. no stimulus, no vaccine, or any twist in the upcoming national election.

The market is certainly not boring as traders must make decisions in an environment that is constantly shifting.

Simpler’s focus is to practice the habit of identifying moments in time where a trade setup presents a greater than 50/50 edge. Now is a time to limit the number of positions and be selective with only high-probability trades.

Of all the “good” trades in this wild market, which ones would you take if you were limited to just two trades per week?

Get picky with only the best of what this changing market gives.

We Saw: market bounce back with strong rally — 

  • Technology stocks covering some of recent losses
  • Nasdaq, S&P each gain more than 2%
  • Sectors across the board rallying

We’re Watching: cautiously whether rebound holds —

  • Enjoying JOMO — Joy Of Missing Out — on rebound
  • Picky patience for plays in short term
  • Extent of new “violent chop” environment

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