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.
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