Stock prices have remained surprisingly resilient this winter in the face of bearish commentary from all sides, writes Ian Murphy of MurphyTrading.com.
Market pundits keep telling us, ‘It’s another bubble’ or ‘Prices have become detached from reality’, or my personal favorite, ‘Stock prices will correct in the early summer’.
UK stocks didn’t get the memo because they have performed exceptionally well, especially considering the interest rate hikes, cost-of-living headwinds, and the country's Brexit-related challenges. Their continental neighbors are also on a roll despite the emergence of born-again hawks at the ECB and a grueling war next door.
Source: Yahoo Finance & Investing.com
In London, the FTSE100 has climbed almost 20% since October and the pan-European STOXX600 has risen 23.2% over the same period. These markets are all the more impressive when you factor in how the pound and euro have performed relative to the USD (insert charts).
As for the market being in a bubble and overdue a correction: maybe it is, maybe it isn’t—I don’t know! One of the significant advantages of being a market participant who relies almost entirely on technical signals to inform entry and exit decisions is the fact that we don’t have to explain the market or predict its next move. We don’t have to monitor the financial news, do fundamental analysis, or even know what’s happening half the time.
For example, since December 29 we have been trading a pure play on the US equity market using the Help Strategy. This strategy is perfect for part-time market participants and can be traded with a geared ETF such as SSO or Micro E-mini futures. The strategy offers trading signals, and it’s up to us how we monetize those signals. It can be a ‘defined move’ daily swing trading approach if we believe the bounce will be temporary, or a hybrid approach using a trailing stop can be employed if we think it will be a longer-term move.
Traders who are short-term bullish had an opportunity to close the entire position on ProShares Ultra S&P500 2x Shares (SSO) when the 3ATR line was reached on February second for 18% profit. Those who expect more from the bounce and are sitting on a trailing stop will profit 9.9% if stopped out at the current level.
As the saying goes, ‘Make hay while the sun is shining’. After that, we can decide to make square hay bales or round ones wrapped in plastic, it doesn’t matter. What does matter is that we get out in the field when the sun is high in the sky, and we get to work. Strategies like this one are the tools we use to do just that.
Learn more about Ian Murphy at MurphyTrading.com.