“To infinity … and beyond!” The Dow Jones Industrials and the other indices continued their inexorable climb last week. The Industrials gained 1.28% for the week, this following a 3% gain last week. The major trading indices - the S&P 500, the NASDAQ 100, and the Russell 2000 all showed strong gains. For the week, the S&P 500 was up 1.42%. This resulted in a 5.4% gain for the quarter – its best first quarter since 1998. The NDX rose 1.7%, and the Russell 2000 was up 2.2.78%. The Russell 2000 rose over 6% during the past two weeks. Each index more than covered the losses from the previous week. The absence of fear of was highlighted by the VIX, the CBOE Volatility Index on the S&P 500. The VIX declined from 17.91 to 17.40. This is the lowest closing level for the VIX since February 18. Volume was a counterpoint to the bullish move. Volume was low and affected the liquidity in options.
A trending one-way market is very difficult to trade. It works counter to a consistent trading discipline. In a “normal” market, I find that all trading strategies are profitable some of the time. In a one-way market, some of these strategies rarely work. As a result, I fall prey to invalid assumptions and become complacent. I must consider many alternative market realities as I manage and review my open positions. I have to fight against automatically discounting alternatives because I am convinced a current market trend will continue. Make no assumptions. Assumptions are a major pitfall for many traders. As I talk to my students I continuously hear these assumptions: “The market has to go down.” “The market is oversold, so I have too…..” The litany of excuses for breaking discipline is endless. We all know the words to this song. Do not let emotions control your trading discipline and behavior. Remain rational. The markets are not going to infinity or zero.
Have a good trading week. Be focused. Know where you are and where you might be going. Remember: “Chance favors the Prepared Mind.” – Louis Pasteur
This week’s economic news:
Monday April 4:
Economic: N/A
Other: Federal Reserve Chairman Ben Bernanke speaks to the Atlanta Federal Reserve Bank Financial Markets Conference in Stone Mountain, Georgia – 7:30 PM.
Tuesday April 5:
Economic: ICSC Goldman Stores Sales – 7:45, Redbook – 8:55, March ISM non-Manufacturing Index – 10:00, FOMC releases minutes of March 16th meeting – 2:00.
Earnings: KB Home (KBH) – Before Opening.
Other: Markets closed in China. Taiwan, and Hong Kong.
Wednesday April 6:
Economic: MBA Purchase Applications – 7:00, Challenger Gray & Christmas March job-cut – 7:30, ADP Employment Report – 8:15
Earnings: Monsanto (MON) – Before opening, Bed, Bath and Beyond (BBBY) and Immucor (BLUD) - After close
Thursday April 7:
Economic: Initial Jobless Claims- 8:30
Earnings Pep Boys (PBY) AZZ (AZZ) – After the close
Friday April 8 :
Economic: Wholesale Trade – 10:00
Earnings: Blyth (BTH) – Before opening
Other: Stopgap federal spending bill expires.
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