The Santa Claus rally continues as investors and traders alike jump back into the stock market. While long in the tooth, this rally continues to defy many traders’ wishes. Many are calling for a sharp pullback or even the next great bear market. We, on the other hand, will follow this market where it takes us. There is no reason to predict anything. In fact, it wouldn’t be a surprise to see a sharp pullback over the next few weeks. Only to see the market roar higher. Sure, anything is possible and while this holds true we need to make sure we remain disciplined with our trading. Your position sizing and exit strategy must be on point. Obey the rules of the system and the noise of “what might happen” will simply fade.

It is funny we are seeing this market just continue to march higher. AAII Bulls just reached 44% last week while bears hit 20.47%. Quite the spread and usually we see some sort of correction. Who knows how deep or how long? It could be over a few days or weeks. If it turns into something sinister the telltale signs of distribution and failed leadership will show up. Keeping things simple is the best course of action. Reigning in your risk here is a prudent move especially if you have holdings struggling to continue to push higher. Stick with Big Wave Trading as we navigate these tricky waters. We will help you get through whatever this market has to throw at us.

Buying stocks up here becomes a bit riskier. Since we are vulnerable to a short-term pullback any new longs have a higher probability of failure. Stocks like now are forming bases. A small pullback would help ease the overbought conditions.