Happy Tuesday, traders…
Jeff here.
If you were trading on Monday, you probably noticed how unpredictable the market has been.
The S&P 500 was up by 1%, then down, then flat, back up by half a percent, and then flat again.
It’s clear that no one really has control over the market right now — a battle between bulls and bears.
It’s like a tug-of-war where neither side is winning, making it somewhat difficult to trade effectively.
That said, several catalysts are coming up over the next few days that could tip the tug-of-war to one side or the other and show us a clearer directional trend.
Plus, there can be incredible trading opportunities hiding in this wild volatility.
With that in mind, let’s get to my Tuesday Market Outlook for the week…
Recent Market Movements
Last week, we got the weak jobs report, which brought some fear to the market. But later in the week, traders started buying back the stocks they had been selling off heavily.
For me, this seems like a “dead cat bounce” — a brief recovery in the price of a declining stock or market, which is soon followed by a continued downtrend.
In other words, the market might seem like it’s recovering, but I think it’s likely just a temporary blip before it drops again.
Don’t get too tantalized by this rally, it may be a false breakout.
Key Events to Watch This Week
We’ve got some important events coming up this week that could make the market even more volatile.
Tomorrow morning, we’ll get the Consumer Price Index (CPI) report. This report is crucial because it gauges inflation, which can impact everything from interest rates to consumer spending.
If the report shows that prices are rising faster than expected, it could send stocks right back down to where they were after the jobs report.
Besides the CPI report, we’ve also got geopolitical issues to keep an eye on, particularly with the Iran-Israel conflict.
If tensions rise, stocks will start to behave differently. We’re already starting to see oil break out (as I predicted), but expect even more sector rotation if these tensions escalate.
Skepticism About Tech Stocks
There’s been some buzz around tech stocks recently, especially those that had bad earnings but seem to be bouncing back.
However, I’m not buying the rebound. It feels more like a reaction move on low volume, meaning there aren’t enough trades happening to make this movement reliable.
When you see a stock like Nvidia Corporation (NASDAQ: NVDA) surge 5% in a day (like it did on Monday), some traders might think that’s a good sign and want to buy it.
But in reality, that kind of swing isn’t always a sign of strength in the market. It’s often a sign that volatility is still high, a sign to be cautious.
What High Volatility Means for the Market
When the market is volatile, you see big intraday moves — where the price swings up and down a lot within a single day.
You also see big daily range bar moves, where the difference between the high and low price of a stock for the day is significant.
While theoretically good for traders, these kinds of moves can create just as much downside risk as they do potential gains.
Because of this high volatility, traders need to be extra cautious. It’s important to trade quickly, taking profits while you have them, and not hold onto positions for too long.
A strategy that can work well in this environment is to “sell rips” and “buy dips.” This means selling when the price spikes up (rips) and buying when the price drops down (dips), but only with a short-term focus. You don’t want to get caught holding onto a stock that might drop further.
The market is in a tricky spot right now. There are a lot of factors at play that could push prices up or down in a big way.
Between the upcoming CPI report, geopolitical tensions, and the ongoing volatility in tech stocks, it’s hard to predict what will happen next.
But one thing is clear — now is not a time to get too comfortable or complacent.
Stay alert, trade smart, and remember to take profits quickly. In this kind of market, it’s all about shrinking the game, being nimble, and adapting to whatever comes next.
Furthermore, stay informed and be prepared for anything. Watch the news, keep an eye on key economic reports, and be ready to act when the market moves.
Happy trading,
Jeff Zananiri
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