Is Bullish Uptick Reality Or A Bear Trap?

2020-06-01 | Simpler Trading Team

Main Street is burning across the United States, so how is it that Wall Street is thriving?

The news has gone from bad to riotous, yet the stock market is pushing higher. It seems the worse the news gets the better the markets rebound.

Does Wall Street have a clue about what’s happening?

Traders are wondering when the market will catch up to reality, or maybe it’s “when will reality catch up with the market?”

A change in this contradiction may not happen until the Fed gets out of the way.

While the economy is driven by the consumer, the market is being driven by the Fed.

This rising market is Fed-induced with its “trillion dollars here and a trillion dollars there” strategy of propping up the markets.

Any bad news or signs of a strong reversal, and “another trillion dollars” prompts a decent rally even though market fundamentals aren’t there to support the rise.

So, as traders, how do we navigate this “enhanced” reality?

For those at Simpler Trading, the general sentiment is to be a “bullish bear.”

An immediate trading plan is to follow the market and not fight the rising momentum.

Look for continued upside while being fully aware that a sharp pullback could happen with any twist in the news cycle or news from the Fed. Trade the market given and not the market wanted.

Trading shorter timeframes — whether daytrading or intraday — lowers exposure to sudden market shifts.

Simpler’s traders want to avoid sticking around too long and getting caught up in a wild news cycle where markets override fundamental signals.

Systematic, disciplined, short-term trading with fewer and smaller trades seems ideal. Taking profits along the way when possible can help maintain a cash position.

Simpler’s traders are following the market’s bullish lead, and staying ready for the bear to be heard once again.

We Saw: Main Street burning and markets rallying — 

  • Dow held steady above 25,000
  • A United States in social turmoil
  • Stocks open summer like the heat — rising

We’re Watching: … a bullish short game with eyes on the bears —

  • Fast-trade opportunities from bell to bell
  • Long-term cost of pandemic — into the trillions in losses
  • Plays in: TSLA, SHOP, MDT, SPX, NFLX

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