Is Monday Stumble Sign Of Reversal?

2020-07-13 | Simpler Trading Team

The markets jumped into Monday on a high note with the Dow pushing above a 500-point gain before the rally crumbled and markets fell into volatile trading.

The stumble into the close still left the Nasdaq sitting comfortably above 10,000 points at 10,390.84. Its 2.13% loss was prefaced with a spike to above 11,000 for the first time ever during early trading.

The Dow held the only positive spot with a rise to 26,085.80 points to gain .04%. The S&P 500’s drop to 3,155.22 points caused a .94% loss on the day.

Despite the setback, the S&P 500 has erased most of the losses it suffered early in the year due to the March pandemic selloff. The index has gained to a point it is inching toward its all-time high hit in February.

The up-and-down session sparked a variety of trade opportunities, especially in big tech.

TSLA, which has been the barometer of a high-flying market, lost 3% on the day and fell well short of trading expectations at $1,498.39. Longs who exited early in the session and shorts who held their ground stood to make gains on the day.

Mixed with the stumbles are signals of a cyclical market change.

When the high-flyers, like tech stocks, pull back it’s a heads-up for traders. High-flyers in this similar pattern in the past have played out significantly to the downside.

It’s a signal the market can drop sharply — while staying bullish — and then fire off and rally.

Fast reversals can wipe out a month of gains for traders not aware of the cycle.

As with all trading, the market can’t be predicted with certainty.

With this much volatility and the suddenness of the move, Simpler’s traders are leaning toward pulling back into safer positions and “watching for tomorrow.”

We Saw: markets hit the ground running and fall apart into the close — 

  • Volatility spiking as early market gains went negative
  • Rumblings loom of earnings season woes
  • TSLA not so teflon-like as it leads market pulling back

We’re Watching: cash position and market direction into tomorrow —

  • If big tech beasts can regain positive footing
  • COVID stocks taking heavy hits
  • Setups in: SPX, SPY, TSLA, RH, SHAK

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