Market Moving Up, Up, Away! — Let It Go

2020-04-30 | Simpler Trading Team

A crazy, crazy market that is baffling traders continues to march upward despite the dismal economic contrast.

The market closed the month on a down day, yet gains have surged in the last 30 days.

The Dow fell 288 points Thursday, the S&P 500 dropped 27 points and the Nasdaq lost 25 points. Still, the Dow closed April up 11%, the S&P gained 12%, and the Nasdaq finished up 15%.

Gains for the Dow and S&P finished with their best month since 1987. April’s monthly gains rival what indexes might see over the course of a year.

Long-time traders are scratching their heads as they calculate how the indexes are climbing in the face of 30 million newly unemployed workers, an ongoing worldwide pandemic, and an earnings season that has everyone slamming on the breaks with no guidance and lowered expectations.

Indexes continue to tempt traders as they push toward all-time highs set just before the pandemic collapse in March.

Stocks exhibited more of the same confusion.

Google earnings came in “less bad” than expected and the stock was up 10% Wednesday. Boeing announces it will lay off 10% of its workforce and the stock rallied 8%.

It’s as if the market is ignoring the pandemic and all its associated problems as if none of it ever happened.

Veteran traders who navigated the 2008 financial crisis know this type of optimistic ebb and flow across the market isn’t always what it appears to be.

Markets with unlimited money infusion by the Fed and frenzied FOMO (Fear Of Missing Out) buying across the markets this week could be red flags short- and long-term.

Select internal signals show increased activity similar to what happened in 2008-2009. If the market follows suit, elevated optimism and buying could exhaust the upswing followed by a rough and tumble May.

Simpler Trading moderators aren’t inclined to chase any propped up or “big picture” optimism. Simpler’s traders have done well through the first quarter volatility and don’t want to give it back by following the crowd.

There’s nothing wrong with taking profits, moving to mostly cash in the account, and waiting for the next opportunity.

Beginning and veteran traders should know they don’t have to “trade every trade,” or trade every day, or even every week.

Wait and watch for the best setups and take those if you choose to navigate this volatility.

We Saw: collective scratching of heads over market movement — 

  • Fed’s Wednesday prop flopped with Thursday down day
  • More harsh unemployment numbers
  • State economies ramping up to reopen

We’re Watching: … internal signals and history’s alerts —

  • How long before FOMO frenzy is exhausted
  • Can the market push to all-time highs during pandemic?
  • Effects of uncertain earnings season reports

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