Past and current conditions

Hey Five Star Trader,

Wow. The current market has been seeing a ton of action recently. This is due to a variety of factors, but before getting to the current market environment, I want to talk to you about the past year.

It’s easy to get caught up in the day-to-day, especially on days or weeks where all you see is red. But investors know that, on the whole, the stock market performs. Even in the face of arguably the biggest catastrophe the economy has ever seen, the stock market stands here a year later at even higher prices. As long as traders make solid analysis, determine their time frame, and don’t let the wiggles shake you out, we should stay in pretty good shape. The stock market is the only place on earth most people are afraid of a sale! One of my favorite quotes from Warren Buffett is “Be greedy when everyone is fearful, and fearful when everyone is greedy.”


Now let’s jump into current conditions…

Jerome Powell recently came out with another statement that hugely affected the market’s attitude. With so much power over market conditions, there comes a question: Do you think they are up for the job? For me, I am undivided on whether they are or aren’t. As this has been an unprecedented year, and they do not have a playbook they can repeat from a past pandemic. However, they have done a decent job of making us believe they are up to the task. It’s more so when their commentary causes jitters, that impacts the market. Every sentence spoken leads investors to question their capabilities is what causes the market movements. The market likes stability and known quantities, and whenever the Fed demonstrates something else is when investors get spooked. However, look at the stock market over the past year. The Fed has proven they will do anything and everything to sustain the economy and markets. Even if they don’t entirely know what they are doing, I would argue they have done well to maintain investor confidence in spite of challenges. 


How am I trading these conditions?

The rally into January and the election have lost steam, market volatility picked up after the core of earnings season in February, and sentiment was so high it ran out of a reason to rally so we experienced a bit of a triple whammy. However, I am gearing up for a busier April, as many charts and indexes are consolidating, which should make for some great breakouts. I love trading the ‘run into earnings,’ or the rally higher into core bullish companies in which investors are anticipating a strong report. Etsy (ETSY) and Netflix (NFLX) are two of those names, with a close eye on Microsoft (MSFT), JPMorgan Chase (JPM), TSMC (TSM), Freshpet (FRPT), and Carvana (CVNA) as well. This seems like a random hodgepodge of names, but each of these names typically moves higher into earnings, and as that season comes around again, I like to start looking at them 3-4 weeks before their reports come out.

Want to learn more about how to take advantage of quarterly gains? Join me for my free webinar on Wednesday, March 31st, at 7:00 pm Central. We will be covering setups, case studies, and more.

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