S&P 500 Exhibits Strong Action
Over the course of the last few months, conditions have been improving, and the S&P 500 is now in a Stage 2 uptrend. The Nasdaq Composite is also in a steady uptrend, and it's looking more and more like the October lows will hold with a bear market bottom most likely in place. While these are positive signs, the rally has yet to broaden out like I would like to see it do. NVDA is the clear leader and old leaders like NFLX, META, AAPL, and TSLA have seen some accumulation come in off their lows.
The same cannot be said for the majority of stocks though. We have yet to see money rotate into new leaders. Examples would be MBLY and FSLR which both have displayed extremely volatile action, making them virtually impossible to get a handle on. When we look at FFTY, IWM, and IWO, we can see they are starting to turn up but are still underperforming the S&P 500 and Nasdaq. In time, small cap and growth will catch up but the prudent trader must have the patience to wait for a "hot market" rather than forcing trades that are really not there yet. In my latest book, Risk Right. Sit Tight. Timeless Stock Market Lessons, I discuss this concept in depth. Patience and risk management are what separate the profitable traders from the unprofitable traders.
Sentiment continues to be somewhat bearish, but has improved since the gloom and doom of last summer. One thing I love to take note of is little anecdotes I get when I talk to people about the stock market. I make it a point to not even bring up the topic. I want to get an unbiased take on what the average person has to say. In 2021, everyone was a trader and wanted to tell me about all about their trades and exploits. Now, things have totally reversed. I've heard quite a few people tell me they given up on the stock market and its' risks to take advantage of CDs at banks yielding steady interest rates approaching 5.00% APY. This is exactly what we want to see. With less retail money in the market, it is easier to see what the funds and institutions are doing.
I still believe Bitcoin and Ether have bottomed, with ETHUSD being the apple of my eye and BTCUSD being a close second. I'm going to write a longer post about this in the coming weeks, but for now I just want to point out that this is not a time to swear off crypto or completely tune it out. In fact, it's just the opposite. This is a time to be monitoring Bitcoin and Ether for sound entry points.
Finally, the FED has been aggressively raising rates since early 2022 and this has been kryptonite for the market. Things may be changing, however, as the FED has signaled it may be finished raising rates. While this is good news, we still need to gauge the indexes and individual stocks to get the best sense of what the market is doing. Even if the bottom is in, volatile action in individual stocks is a nightmare for swing traders, and thus it is best to remember to keep risk management as your number priority and commit to patience until conditions really heat up.
Risk right. Sit tight.
To learn more about swing trading strategies, stock market trading, and how to trade cryptocurrencies, visit my course page.
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