Greetings from the balcony of a cruise ship! While this week's blog might be a bit shorter, I'm still packing in my thoughts and trade ideas on the current market landscape and how I'm positioning my accounts amidst recent developments.
Market Overview: Riding the Waves
After the markets surged higher post-election, we've observed some selling this week. However, when we zoom out to a weekly chart of SPY, we notice that we've only retraced about half of last week's bullish candle.
When you look at the chart above you see we haven't even retested the weekly 10 ema yet. This is not much of a pullback.
It's important to remember that while the market is unpredictable, it's uncommon for it to move straight up or straight down. If you haven't backtested a few significant bearish moves, I highly recommend doing so. You'll find that even during substantial declines, there are aggressive bounces along the way. We're still in a bullish trend even with a little more aggressive pullback in tech.
Playing that doji like I mentioned to the Mr Money Maxwell Inner Circle would have been nice. Notice we haven't touch the 10ema on QQQ either
IWM looks similar.
We do have NVDA earnings coming up on Wednesday and that could move the market as NVDA has a huge market cap and so it's weighting is pretty big in the SPY and QQQ.
Speaking of earnings this is the most popular stocks with earnings this week:
Trading Strategy: Buying the Dip
In my trading account, I'm positioning to buy the dip. Specifically, I'm selling puts on companies I wouldn't mind owning at lower prices. Additionally, I'm initiating pyramids into companies I like from both a fundamental and business perspective.
This is all posted real time in our discord. If you aren't participating I have NO idea why not. Also I'm sharing more in-depth information with my inner circle! No reason to post the same thing here, check discord and join the inner circle!
Long-Term Account: Benefiting from the Pullback
My longer-term account had several covered calls that expired this week, coinciding with November's monthly expiration. The recent pullback actually benefited some of the covered calls that were being tested, providing an opportunity to adjust positions favorably.
The Wall of Worry: Navigating Market Sentiment
The "wall of worry" in a bull market is a fascinating phenomenon. If you haven't experienced it before, you're witnessing it now as many people harbor a bias that a significant correction is imminent. The reality is, no one truly knows what's ahead.
I rely on moving averages to gauge potential bounce points. If we fail to hold a moving average, it serves as a warning sign. I discussed this in a [previous blog post](#)—feel free to check it out if you haven't already.
Bonds vs. Stocks: Diverging Narratives
One slightly concerning issue I'm monitoring is that bonds and stocks aren't telling the same story. Generally, when stocks outperform, bond yields tend to decline. We observed something similar on the downside in 2022 when both bonds and stocks fell together. It's something worth keeping an eye on.
We've been building a position in TLT, as it seems the Federal Reserve plans to continue cutting interest rates, even if bonds aren't trading accordingly.
Federal Reserve Chairman Jay Powell has stated he's not in a rush to cut rates. However, let's not forget he initially started with a 50-basis-point cut. This fact might have been overlooked by some of the talking heads we see on television and the internet.
Market Sentiment: Staying Grounded Amidst Noise
This market is almost craving negative headlines like the kids wanting soft serve ice-cream on the cruise ship! These headlines make people nervous, and financial experts and online communities often thrive on generating anxiety. Don't fall for it. Remember that markets aren't supposed to move in straight lines.
My point this week is to remind you that we should continue to use the information at our disposal and our understanding of math and probabilities to trade small, trade mechanically, and trade often. There's nothing wrong with simple strategies and modest trades.
My approach isn't to be overly aggressive or take unnecessary risks in the short term. I'm focused on passive wealth building because I know that's what's worked for me over the years.
Ok I'm headed back to join the festivities of a birthday celebration onboard the ship. Cya here next weekend, much sooner in discord!
Happy Trading Good Kids!
-$Maxwell
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