Jokes about how the market is never going to go down again have been more frequent lately. The Nasdaq 100 is back to where it was just two days after it hit an all-time high on February 19. The gap that was created on the chart when coronavirus fears first took hold, has been completely filled.
Much of the rest of the market has not been nearly as robust. Both the Dow Jones industrial average SPDR fund (DIA) and Russell 2000 small cap fund (IWM) are anywhere near their February levels, but they are off the March lows and the bounces in many individual stocks have been substantial.
It has been a great run and many market players firmly believe the "V"-shape recovery will continue. There has been an almost total disregard of the economic problems that lie ahead and concerns about a second wave of coronavirus have been ignored. It seems unlikely that sentiment can stay this positive for much longer, but a big reason that the indexes have been running up has been a high level of skepticism.
The "fear of missing out," must be shoved aside and stronger trading discipline needs to be used.
Like many others, I have seen a nice recovery in my accounts and I do not want to give back gains. My primary focus is always on trying to keep my accounts as close to highs as possible. That means not letting gains slip away and not holding longer-term positions through prolonged weakness.
I'm stepping up my defense now, which means tighter stops, more aggressive profit-taking into strength, and more selectivity when buying new positions. Most importantly the "fear of missing out," must be shoved aside and stronger trading discipline needs to be used.
I'm inclined to start looking for some index shorts this afternoon, but I want to see how the action looks in the final hour. The action has had a frothy feel to it and I'm going to be extremely stubborn about letting my accounts dip from here.