My Strategy for Navigating This Challenging Stock Market
Investors await the next move as markets digest Friday’s technical breakout.
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After a dull session on Monday, market action is slow and mixed on Tuesday as investors await additional news flow.
President Trump is reportedly considering firing Fed Governor Cook for alleged mortgage fraud, which is stirring up more concerns about Fed independence. Bonds are trading lower as interest rates tick higher and the yield curve steepens.
There are also tariff concerns again, as higher rates are set to go into effect against India for its Russian oil deal, and Trump is talking about retaliating against European countries that are attempting to put taxes and regulations on U.S. technology firms. In addition, Nvidia NVDA earnings are coming up Wednesday night, and PCE inflation data arrive Friday morning.
Technically, the indexes made a strong breakout move on Friday, but momentum slowed Monday and is now trying to regroup for another push higher. The news flow is a key issue, but there is also the problem of negative seasonality as we approach the Labor Day weekend.
Although the indexes are near highs, it is a murky picture as investors grapple with the news flow and look for something to trigger another round of buying. Bears continue to complain and moan about the economy and valuations, but they have been wrong for so long that it is tough to take them seriously.
My primary focus right now is managing positions and trying to keep accounts as close to highs as possible. It has been a great run off the April lows, and there are plenty of profits to protect, but many charts are still in good shape, and there isn’t any compelling reason to dump them. My goal is to play stronger defense, but to be ready to take advantage of breakdowns in favorite names.
One of the bigger positives is the potential for more rotational action into groups outside the Magnificent Seven. However, rotation is never smooth, and it is important not to be too aggressive with small-caps that have high levels of volatility.
We have a slightly negative open on Tuesday morning.
At the time of publication, Rev Shark had no positions in any securities mentioned.
