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Good News Bad News

Writer's picture: T. LivingstonT. Livingston

On Monday, the major news was that an experiential COVID-19 vaccine was over 90% effective in testing. This sent the S&P 500 to a new high, the Nasdaq Composite over $12,000, and the Dow Jones to $30,000. By the end of this week, those indexes had fallen. I'm always cautious when I see major positive news being sold off, especially after the Dow or Nasdaq reaches a major price level or the S&P 500 is rejected off a new price high.





From a sentiment standpoint, the NAAIM Exposure Index has reached 96, indicating excessive bullishness in the market.


Looking at individual stocks, we are seeing a change of character. Stocks like Pelton and Zoom, which had monster, parabolic runs in 2020 as their products benefited from the lockdown, were both down for the week and look like they need time to recover.




Amazon is chopping around and currently under its' 50-day moving average while Apple is holding up well in an orderly fashion. Tesla is below its 50-day, but hasn't seen much distribution over the last month.





I'm seeing mixed action in my portfolio as well. I was stopped out of some positions like Salesforce, but other positions like Plug, Beem, Futu, Spwr, GBTC, MRNA, and Bidu are still acting well. Recent IPO CRSR is holding near its' breakout level, and Unity Software also had a nice bounce off its' 20-day moving average this week on volume after reporting earnings.

So where does all this leave us? For me the decision is clear: I am in no rush to force buys into new positions. A choppy, volatile market can be deadly to a trader and patience will literally pay if you are ready for the next rally. Even if the market remains in its' current range, an indecisive or scattered market can be very difficult to trade. The key is to have the discipline to wait for the best setups. At the same time, I'm going to keep what is working. As long as my current positions are holding up well, I'll show them the patience they deserve. If they start to falter or lose major support levels, I'll exit quickly. My main goal is to have my capital and mindset ready for the next strong uptrend. Risk management is always my number priority because in the stock market good news can become bad news very quickly.


Full Disclosure: I currently own many of the stocks mentioned in this post.

Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained in this post constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned in this blog or the associated Twitter and Instagram feeds. The stock or stocks presented are not to be considered a recommendation to buy any stock or stocks. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.





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Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

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