Have you ever noticed how few traders and hedge funds managers who regularly appear on networks talk about risk management or handling the fear of missing out (FOMO)?
After Thursday's rally that sent the SPDR S&P 500 ETF (SPY) , iShares Russell 2000 ETF (IWM) and Invesco QQQ Trust (QQQ) up anywhere from 1.4% to 1.80%, I saw folks on TV yammering on about runaway bull markets and how you need to be buying stocks, but nary a word about risk management. I want to say this is odd. Still, after sitting behind a trading screen for nearly 25 years and listening to well-known personalities utilize price to eyeballs to justify valuations in the late-1990s, I've grown accustomed to the games folks on TV play.
We both know that if stocks reverse lower here on Friday or on Monday following the Fed's Jackson Hole symposium, many of Thursday's cheerleaders will be nowhere to be found. But again, that's par for the course when listening to most folks on TV.
My view on the index ETFs is relatively unchanged from the past few days. While the charts have improved from where they were at Wednesday's close, it'd be foolish to ignore that Fed Chairman Jerome Powell could sneeze and turn everyone bearish.
Take QQQ, for example.
With price above both of our short-term exponential moving averages (EMAs), we only need the Relative Strength Index (RSI) to push back above 50 to flip our bias back to bullish. But with Powell on deck and the uncertainty surrounding the Jackson Hole conference, I likely will avoid making any commitment beyond the day timeframe until next week. The risk to this approach is that price runs away from me today and early next week. But that's a risk I'm willing to take. If you're eager to take on additional risk, a perfectly reasonable approach is to get long today and use a daily close back under the 21-day EMA as your dynamic stop.
The charts of SPY and IWM are nearly identical to QQQ, so if you prefer to trade those, I would continue to use a close under the 21-day EMA as your dynamic and short-term stop.
While I am long MSOS and plan to remain long it and many of the US multi-state operators that trade on the Over-the-Counter market, I expect sellers to test the market as the price approaches $13.95. The horizontal line at $13.95 represents the volume-weighted average price (VWAP) from the consolidation zone between $13.25 and $14.75 during May. Ideally, we'll see a week or so of consolidation under $14, followed by a surge above $15. That would likely attract the momentum crowd, and that's what this sector needs to reach escape velocity.