The Stock Market is Stalling Out But There are Still Plenty of Great Opportunities
Stocks began last week on fire but could not hold onto their gains giving back all of Monday to Wednesday's advance in the last two trading days.
Friday was especially weak with the Russell 2000 trading down just shy of 4% and the S&P 500 and NASDAQ down nearly 3%.
After such a quick rebound that surprised even the most optimistic bull, it would make sense to expect some selling. But the question everyone wants the answer to is, are we going to test the March lows?
Technically speaking In the short to medium term this looks to be just a pullback in an uptrend. All the major indices have closed above their 20 and 50 day moving averages which is still positive in my opinion.
Longer term, the jury is still out whether this is a bear market rally that will eventually come to an end as we start to see the effects of millions of lost jobs and economies operating at a fraction of pre-coronavirus levels.
All of the above means different things to different people. For the long term investor it's more important than ever to understand what you own and why?
Like I've said before if you were feeling sick to your stomach when stocks were crashing in March, this is a great time review your holdings in detail and make sure they match your tolerance for risk.
There is nothing wrong with having a larger than normal cash position in uncertain times like we are experiencing right now. Even investing legend Warren Buffett didn't do much buying during the crash and has been increasing his cash position.
For the trader or those with a shorter time frame, there are plenty of stocks setting up on the long side as the short term trend remains intact.
There have been plenty of opportunities the last couple weeks in individual names and sectors such as the precious metals, biotech/healthcare, technology, tankers and even select energy names.
XLE (US energy ETF) & XEG.TO (CDN energy ETF) have moved 17% and 24% higher in the last two weeks even as the price of crude oil (June contract) plunged over 20%. Many individual energy names moved higher by 50% or more in the same amount of time.
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