Happy Tuesday, traders…
Jeff here.
The market took a huge sigh of relief yesterday.
But the news wasn’t that shocking as many serious traders were already predicting that President Biden was going to drop out of the race last week.
I told my Burn Notice Alliance members that we would likely see a relief rally regardless of the outcome. And sure enough, that’s what happened.
The overall outlook for the election hasn’t changed much, except now we don’t have to wait for Biden to make his decision — he’s already dropped out.
One potential wild card is how chaotic the Democratic convention might be. If there’s a lot of in-house fighting, it could be bad for the stock market.
For now, I expect the market to shift its focus away from election concerns and concentrate on tech earnings, starting with Tesla Inc. (NASDAQ: TSLA).
These mega-cap tech stocks need to deliver mega-cap earnings. If they don’t, the sellers we saw last week might come back with a vengeance.
So, keep an eye on those earnings reports — it’s going to be a critical week for the tech sector and the overall market.
With that in mind, let’s get to my Tuesday Market Outlook for this week…
Keep Cash on Hand
Remember the age-old saying, “Cash is king?”
Well, it’s more true now than it has been in years.
In this market, you need to always ensure that you have a liquid cash cushion.
Doing so can give you three big advantages:
- Guaranteeing that you have enough cash to jump on potential trading opportunities when they arise…
- Offering a liquid ‘safety net’ when trades don’t go according to plan…
- Knowing you have a financial cushion can make it easier to maintain a level-headed approach, making decisions based on strategy rather than fear or greed.
In other words, holding cash in volatile markets provides flexibility, security, and peace of mind.
The problem with having no cash is opportunity cost.
If all of your cash is tied up in open positions at a time when the market is experiencing crazy volatility, you’re likely to miss the truly five-star plays when they come across your screen.
Don’t put all your eggs into the market right now. This is a time when, once again, cash is king.
React to the Present (Don’t Try to Predict the Future)
While predicting long-term market moves can be tempting, these unpredictable times call for a shift in your approach.
There’s a lot of uncertainty in the market right now — no one knows where things are headed.
Instead of always trying to be two steps ahead, it’s more practical (and safer) to react to what’s happening right in front of you.
Think of it like driving on a winding mountain road with zero visibility — you can’t anticipate every curve or turn.
In such situations, you’ve gotta focus on the immediate path ahead, that crucial five feet in front of you.
This allows for better reaction times and sets you up to make decisions that align with the current moment.
Prioritize Tech Earnings Over Election Predictions
Unless you’ve been living under a rock for the past three weeks, you’ve probably noticed that much of the narrative has been focused on the election.
But now that Biden has officially dropped out, a lot of the political uncertainty has subsided.
I expect the market’s attention to move away from election speculation and toward tech earnings this week.
Here are the companies reporting over the next few days:
And speaking of earnings season…
Stay in Your Lane
Ultimately, if you wanna win in the stock market, you’ve gotta recognize (and play into) your strengths.
If you’ve been trained and have experience in stock and options trading, stick to that. This isn’t the time to dabble in unfamiliar territories.
For instance, many options traders (myself included), make poor bond traders (and vice versa) and many short-sellers make horrible momentum traders.
Each trading style has its nuances, requiring a different mindset and set of skills.
Don’t worry about the corners of the market that you don’t understand. Stick to what you know best and you’ll be a better trader for it.
Happy trading,
Jeff Zananiri
P.S. Think earnings results are a total mystery? Think again…
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*Past performance does not indicate future results
