Is A Stock Market Reversal Brewing?

2020-11-18

In trading, there are at times signals of something ominous on the horizon, but none so strong to spur a move to “bet the farm.”

Simpler’s traders have watched a nasty week unravel for anyone on the short side of the market even as an overall bullish trend holds.

Monday’s record market close morphed into back-to-back days of losses.

There are doubt-inducing signals — VIX, GLD, Fed, etc. — and growing similarities to the market in 1998-1999 before the crash of 2000 that conditions are brewing toward the downside.

Similar to two decades ago, there is a strong euphoria as the market climbs (despite sharp pullbacks like this week) and a tangible fear of missing out. But will the market crash as it did at the turn of the century?

Chat rooms are buzzing with speculation about all possibilities. Time and the market will have final say in any discussions, no matter current convictions.

Navigating this type of market environment requires traders to develop a psychological strength to stick to a plan and not let euphoria, fear, or any emotion overtake trading decisions.

Simpler’s traders are focused on proven strategies — including more complicated setups producing gains — and daily practices to avoid risk. This helps reduce stress in an uncertain market while allowing opportunity to grow the trading account.

We Saw: Another sharp down day across all major indexes — 

  • Earnings trades — with risk — still in play
  • Stronger need for precision in trade execution
  • Shorts getting ripped — again

We’re Watching: For stronger signals indicating direction —

  • Bullish opportunities with a bearish hedge
  • Strength of pandemic stocks as lockdowns loom
  • Setups in: NVDA, CHWY, VIX, PTON, NIO