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So… what was that?

Making sense of the last week in trading
 
   
     
   
 
AUGUST 12, 2024
   
Editor’s Note: If you’ve got questions about whether we’re heading higher or lower, and more importantly, what to do if the bottom falls out of the market and we enter a true recession, make sure you catch Jack Carter’s Recession Roadmap here! 

Hey y’all,

It wasn’t that long ago, a week ago today, that the market was in a full-blown crisis.

A bad jobs report had sparked fear of a recession, a lot of people (myself included) learned about the Sahm Rule for the first time, and pretty much everyone who had long-term holdings took a huge hit.

And then… it was just gone… 
 
 
At Friday’s close, we had broken even, putting the nightmare of Monday completely in the rearview mirror. 

So, where does that leave us? 

Well, the economy isn’t exactly healthy, when you see headlines like these…
 
 
But the stock market feels incredibly resilient.

So I asked ProsperityPub’s Nate Tucci what he thought. Here’s what he had to say: 
 
 
Me: “Nate, what are you expecting this week after last week's eventual breakeven? Any particular stocks or stories you're watching?”


Nate: Well, the market broke both of the levels I suggested it would need to be back in a continuation mode toward highs and that does fit with my longer-term view of another bullish run before post-election meltdown, so that is kind of how I am playing it now.

One thing I think is worth noting is that the range of movement has really opened up. In other words, when we were making higher highs every day, if the market broke lower at all it would invalidate a trade... Now the range for where a short term long can still be valid is a lot wider in my view.

I think the big mistake people will/can make from here is to try to go short every time there is any downside momentum and vice versa because it's more than likely we'll get some testing of recent areas which, again, will feel like a deep correction compared to how the market has behaved the last 8 months.

A smart thing to do for options traders might be to just add a week or two to the exp/timeline of their trade to give themselves a little more durability in those scenarios.

I appreciate Nate’s insights because they’re even-keeled. He doesn’t get too high or too low on any piece of information.

It will be interesting to see if his projection of a post-election selloff comes true. As I’ve said before, I don’t think either election outcome itself would spark such a reaction because Wall Street knows both of these candidates and the consequences of their policies. But the election itself could serve as an inflection point that lets the air out of the balloon regardless of who wins.

I do think his advice is sound though.

With all the short-term volatility right now, you’re wise to give yourself a little more breathing room to get out of a trade.

I took a shot at a wrap order on DIS last week that never quite recovered and cost me $250. No big deal, but I’d love to still be in the fight this week to see if Disney has a stronger week. 

Hakuna Matata, I suppose…

Have a great week,

Stephen
   
 
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