The Shakedown 9-20-20

LAST WEEK, S&P 500 (-1.02%)

Monday: +1.32%

Tuesday: +0.51%

Wednesday: -0.40%

Thursday: -0.88%

Friday: -1.51%

Stocks suffered another losing week, cutting through key support levels as yesterday’s leaders continue to fall from highs. The major indexes are whipsawing back and forth, closing near the week’s lows. The market is clearly under some pressure as volatility continues to rear its head. The Nasdaq and S&P alike closed below their 50 day moving averages for the first time since April 13th and 23rd respectively. 

We’re seeing very difficult action with the back and forth chop with the downward bias we’ve seen the last few weeks. There are times to be over-active because seemingly everything is working, and there are times to do very little, sometimes nothing at all, that will end up being the best for your account and mental capital all the same. After three straight negative weeks for the stock market, the rally is facing increasing pressure as we are currently testing a very important support area. While it’s positive stocks closed well off their lows Thursday and Friday, they finished on the low end of the weekly charts, telling us the bears continue to be in control for now. There are very few new buys working right now, it’s best to remain patient and not fall victim to overtrading a difficult market. Warren Buffett has a saying “investing is like stepping up to the plate, except there’s no pitch count, you can take as many pitches as you’d like,” which is where we got the saying “wait for your meatball from.” Right now, the pitcher’s throwing screwball after screwball, we’ll be back to the soft tosses soon enough. One of the biggest parts of this game is not swinging at too many screwballs. Until we see a major turnaround, the expectation is more weakness. 

Some news that could sway things in a positive direction would be a new coronavirus stimulus deal. Congress completing a new package could definitely be a positive catalyst that stocks need right now. We saw some major rotation out there last week, as the FAANG crew was under pressure, transports housing and retail stocks saw some strength among the market weakness. We’re seeing a shift to value stocks and away from the high beta stocks. 

After talking with many traders last week, myself included, the common theme was overtrading and oversizing under very difficult market conditions. If you fell within this category then you have some work to do on selectivity and patience. We can still have a very active Alpha Chat without feeling the need to have enormous amounts of risk on. If you feel this was you this week, do what you gotta do to make the necessary changes. One of the most important aspects of trading is constantly going over your mistakes, it’s the only way to get better and maximize your returns. Not only do you constantly have to be well-researched, you also have to have acute awareness of your emotional levels as well as the mistakes that are currently hindering your trading process. There are only about 10 broad mistakes you make in trading that you will make a thousand times each in your career, and the losses hurt just as much as they did year 1, you’re just a bit more used to them. 

But this game ain’t for the weak-hearted!

“So I took it personal…."

Earnings This Week

Click the above picture for a full list of the companies reporting this week

CMI Long

Unbelievable relative strength in CMI as the stock did not flinch one bit during last week's selloff. Straight forward strong bullflag setup here in a sector that showed great relative strength as a whole last week. Want to see that volume uptick through resistance at $215.

Trigger: $215

Stop: $205.89

Target: $235-245+

Click Below for this week's Watchlist

Hope to see you in the chat Monday!