I surveyed the stock market today and here’s what I found.
Takeaway #1: The resilient nature of the market rebound
Is anyone else impressed by the resilient nature of the market rebound? I find the Nasdaq’s V-shaped rise to be the best example of this. We haven’t seen two consecutive down days in two weeks. And two out of the three single losing sessions were dojis. Bulls couldn’t even wait a day before running back in. Those waiting for a dip on the S&P 500 and Nasdaq have been left behind.
Takeaway #2: V-shaped recoveries are tricky
V-shaped recoveries are always tricky. By the time it’s apparent the daily trend has reversed from down to up, it feels extended and irresponsible to chase. Yet, chase you must if you want exposure.
Takeaway #3: Favor of lower-risk entries
Of course, an alternative is to avoid playing the overstretched indexes in favor of lower-risk entries in individual names. I don’t mind this idea at all.
Takeaway #4: Risk appetite is alive and well
Look who littered the leaderboard on Monday: RIOT, GBTC, TSLA, SQ, FSLR, ADBE, PINS, ROKU, PLTR. Notice the recurring theme? These are aggressive/highly volatile stocks. Some are in the underbelly. What does it mean that they led? It means that risk appetite is alive and well. You don’t see these names as leaders unless traders are feeling optimistic.
Takeaway #5: Risk appetite is alive and well even on ETFs
We could extend the previous point to ETFs. BITO, ARKK, and QQQ were all leaders on Monday. That doesn’t exactly scream risk-off now, does it? Want more evidence? How about semiconductors like NVDA and AMD returning to uptrending status?
Takeaway #6: Crude oil got whacked
Is anyone disappointed crude oil got whacked? Sure, it took the wind out of the sails of energy stocks and commodity names, but they need a breather anyway. I love how we saw rotation out of these sectors and into the tech crowd. This is healthy price action.
Takeaway #7: VIX is a teenager again
How about that VIX? Smooshed another -5% to tumble below the 200-day moving average for the first time since we kicked off 2022. It’s a teenager again! I’ve said it before and I’ll say it again. Fear has left the building.
Takeaway #8: The tradeoff
This ongoing recovery reminds me of the inherent tradeoff to confirmation. Want to wait until the coast is clear? Want to wait until every index and sector is in an uptrend and at new highs to signal the bear has been vanquished? Feel free. But realize that in exchange for all that confirmation, you miss buying at a discount. The only possible way you will ever buy during a fire sale is if you’re willing to put some money to work while the market still looks ugly.
Read more Tales of a Technician [FREE Content]
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
Legal Disclaimer
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.
