Here's My Game Plan in a Confused and Inconsistent Market
The current choppy and sloppy trading action requires a different approach.
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Market action is confused and inconsistent as investors deal with a barrage of Trump policies, uncertainty about the economic situation, and shifting market leadership.
Tariffs continue to produce economic uncertainty, but that is being offset to some extent by economic optimism, hopes for lower taxes, and a better regulatory environment. However, there are signs of increased inflationary pressure, which is hurting bonds and cutting hopes for a Fed rate cut later this year.
Fed Chair Jerome Powell will be testifying before Congress on Tuesday and Wednesday, which will put more focus on the inflation issue. There is no question that he will be asked about the economic fallout of Trump's policies and put that issue front and center.
There are a host of political and economic issues creating increased market volatility and a high level of inconsistency. The strong trend in the Magnificent Seven that lasted for a couple of years is under extreme pressure and may be over, and rotation into other areas of the market has been very inconsistent.
This is a very tough market for initiating new positions because of the lack of a trend. If your time frame is short enough, the volatility can be traded, but if you are trying to build some longer-term positions, the choppy and sloppy action makes it very tough to find good entry points. The alternative is to buy incrementally on a wide scale and be prepared for sizable pullbacks.
Despite the uncertainty and choppiness, the indexes are still technically in good shape. The S&P 500 is over its 50-day simple moving average and bounces back quickly after bouts of weakness. The price action in the Mag 7 is poor, but it is much better in other areas of the market.
My game plan is to manage existing positions tightly and try not to let anything slip too much. I'm not finding much to buy right now but I continue to run through the charts and do some very short-term trading in speculative groups such as robotics and space.
It is a tough market to navigate, and doing less is probably the best approach.
At the time of publication, Rev Shark had no positions in any securities mentioned.
