Stocks are extremely correlated right now, which means that most charts look quite similar. That is a function of the very high level of volatility. When volatility slows there will be more focus on individual stock-picking and the best charts will become more apparent.
Currently, there are almost no good "buy setups." If you are buying, it is based on fundamentals or volatility. Good stocks require some sort of support and a base to produce a good risk-to-return ratio. There are very few charts like that right now. This current V-shaped action creates more short setups than buy setups.
Many market players are concerned that they will miss the opportunity to buy for the long term if they do not hurry and buy right now. The basis for that concern is that stocks are going to go straight up and there will not be any good entry points. It is important to recognize that buying at the low is more a game than anything else. Big returns are a function of buying when risk is reduced. You have increased risk if you are constantly trying to time the exact low.
I've used Disney (DIS) as an example of a stock to buy for the long term. It is bouncing but I still see no reason to build a large position at this time. The chart suggests that there is some bottoming but there is nothing to indicate that a sustained rally is likely to begin right now.
In the short term, market direction is going to be dictated by the reaction to some extremely poor economic news. While it is expected, the question will be whether it produces a strong emotional reaction that affects sentiment. The reality of another 10 million in unemployment claims will be quite sobering when the human cost is considered.
The indices are seeing a bounce on a comment by Dr. Fauci that he sees "glimmers" that social distancing is working. Any optimistic statements of this sort are triggering buy programs much like comments about China trade triggered computer reactions a few months ago.
There is an intense focus on what will happen with large allocations at the close Tuesday. Some traders may try to front-run this action while others may try to fade a spike. While it will be very difficult action to navigate in the next couple of days, we should see more natural flow again.
I'm doing very little but am watching for an opportunity to short this counter-trend bounce. They have a tendency to go higher than most people think is reasonable.
"Trading" - Google News
March 31, 2020 at 09:54PM
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8 Random Thoughts on Trading This Market - TheStreet
"Trading" - Google News
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