Lean Into Caution To ‘Float’ Rough Market
We often look to a simple message that can shed some light on this choppy market:
It’s easier to trade the tide than try to jump on a single boat trying to stay afloat.
The major indexes trade with relatively more predictability compared to specific tickers that can rise and fall like a tidal wave.
The market has proven uncertain, even treacherous as it keeps pulling back then rallying higher.
Today, again, the Nasdaq and technology sector struggled while the Dow Jones and S&P 500 hit records.
The U.S. government continues to pump money into the economy in response to the pandemic and the market keeps reacting.
- Assess the market on a day-to-day basis with plans to trade in shorter terms
- Consider taking gains before profit targets are met
- Avoid having too many trades open
- Maintain a strong cash position
- Know your personal risk vs. reward tolerance
Much uncertainty lies ahead for traders including long-term pandemic concerns, oil struggling again, unemployment (and too many jobs open), world economies, and there may be no end to this unsettled environment. We don’t know if we’ve seen the worst of everything.
Along the way, we remind ourselves that traders who stay cautious and prepared while waiting and watching as the markets dive or rally tend to be better positioned to take advantage of opportunities that arise.
We Saw: Wildly mixed market sees new highs —
- Dow, S&P rally into new highs while Nasdaq slips into red
- U.S. lawmakers agree on another $1 trillion in spending
- Inflation heating up across industries into fall
We’re Watching: Market showing “determined” underlying strength —
- Lots of watching —and waiting for strategic plays
- Effects of a trillion dollars of more government money
- Setups that don’t put us on wrong side of market action