E Stocks Headed In Both Directions

The last several months have already seen markets driven in both directions by trade and tax policy, geopolitical tensions, and developments surrounding Special Counsel Robert Mueller’s probe into whether Trump campaign officials colluded with Russia’s efforts to interfere in the 2016 presidential election. The optimism and pessimism gauges have been extremely volatile of late, seeing steep swings on a near-daily basis, reflecting the movement seen in equities themselves, which have largely traded in a wide range for weeks, repeatedly testing both extremes of that range. "The market is still very susceptible to technicals at this point," said Jeff Kilburg, CEO of KKM Financial.

Breaking below the 50-day moving average caused a "technical washout in the market," he said. The Nasdaq and Dow also closed below their 50-day moving averages last week. If they can recover and build upon current gains in the near-term while earnings continue to come in strong, this April could easily finish with strength and track the pattern of the most recent 21-years.

The current range-bound trend might not last very much longer. The best course of action is to trade in the direction of any momentum behind any break outside of the current trading range, but remain wary of a false breakout and maintain tight stops. Until the breakout happens high volatility provides an opportunity to generate premium from selling credit spreads. Holding cash is also a viable strategy if you prefer to sit on the sidelines and wait for a longer-term trend to play out. 

 

Disclaimer: Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to ...

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