Uncertain Times

Bill Poulos is an investor who co-founded Profits Run, Inc., a financial publishing company. The company has assisted over 150,000 people across the globe with their programs, such as Premium Income Alert, 20/30 Wealth Trader, Earnings Profit Alert, Automatic Income Engine, and Rapid Income Engine. They give their clients the tools to make smarter trades with fewer risks while managing wealth. Bill went to the General Motors Institute where he earned a bachelor's degree in engineering. He attended the University of Michigan for his MBA in finance. Bill Poulos contributes to several online publications highlighting the economy and the markets. He is married and has three sons and two grandchildren. They live in Wixom, Michigan where Profits Run is located. Read below where Bill discusses the uncertain stock market. 

This last week we came to the last full week of trading in the first 6 months of the year. Not only have we seen significant volatility in the markets, but we have lived through some of the most historic times many people have seen. Not many can remember a time when life was so uncertain, where this many jobs were lost and with the possibility of a continuation of the Covid-19 pandemic. Most will remember these times as a time of challenge as well as possibilities. While we all are finding ways to deal with our current situation, it should not be forgotten that this is also a time where we can find great possibilities to improve our financial futures.

Many have heard the old saying, “Buy when people are fearful, sell when they are greedy.” In our current situation, the markets have seen much fear as traders have been uncertain as to what may happen in the future. This has led to a major drop in the market which led to a significant recovery. This recovery, after the fear happened, provided an opportunity for many to profit from the move back up. The question is - “Are we now in a time where investors are becoming “greedy””. If traders are now becoming greedy, we need to be careful and prepared for a possible move back down. While we cannot say this is happening right now, we do need to be careful in case we see sellers begin to push prices back down once again.

As you look at the current market movements in the charts below, you will see the major move down followed by the major move back up. In the next few weeks, we will want to carefully watch what happens on these charts so we can prepare ourselves to take advantage of any movements that may happen. 

This week is a holiday week where the markets will be closed on Friday. This may cause some additional volatility especially with the Non-farm employment numbers and unemployment rate being released on Thursday. Make sure you are prepared for this increased potential volatility by using good risk management. With the markets being very sensitive to the news that is coming out, make sure you keep an eye on the economic calendar for all upcoming releases.

Today we are going to look at the weekly charts of the Nasdaq, DJ-30 and SP-500:

NASDAQ

DJ-30

 SP-500

In these three charts you can see a very similar pattern forming over the weekly time frame. The one difference is that the Nasdaq has taken out the all-time highs recently. The DJ-30 and the SP-500 are almost identical in how they have moved. These charts clearly show the significant drop that happened as well as the, almost, complete recovery. The question now is having we seen the end of the move? Right now, we are trading about where we would have if the pandemic never happened. We will need to watch and see what happens if the Covid-19 spread continues to increase as this may be a catalyst to another down swing.

As always, it is critical to manage our risk, so we will not lose more than our comfort level. Make sure you are considering the added volatility we are seeing currently to position size appropriately. Have a great week!