Trading Journal - Consumer Spending Holding UP! (06.28.20)

Last week markets closed in deep in the red. What is not ideal for bulls is that the price action on leading stocks such as the big FANGs were falling hard on Friday. Significant damage was done to the FANGs and also many other tech stocks. Furthermore banks were not welcome with open arms after the stress tests and also sold off. High yield has another red day as for the month of June is it is mostly red. While bonds, TLT, has been creeping up and so is commodities gold and silver.

Generally speaking there is a lot to be done for stock prices to recover in the recent weekly drop. The damage done has lead to mostly a flat June. What is interesting is the short term have markets indicated oversold while its the week before July 4th and hence a shorten trading week with Friday markets closed.

Link of chart above from stockcharts.com

So what happens during the week before the July 4th holiday where the markets closes? Well more likely than not on the day before the holiday stocks tend to be higher relative to what the stockcharts.com chart indicates. Although not straight forward it can be safe to assume buying stocks two days before the holiday provides less returns than if bought one day before the holiday. This would mean that the day of it has risen more than if it was a few days before July 4th.

This setup to what I believe to be a bullish week before July 4th. Not to mention the main chart of this post shows the current US population personal income. Notice on that chart how it has risen since the lock down and protests. Global slow down or not the consumer still has more money now than they did in March. Not to say this is a solid proof that the economy is on good footing, but the current market sell off maybe held up temporarily by flood of FED liquidity just like how personal has remained up.

Trading Actions for the Week

If the week starts of in the red I will be looking to buy in the market. If it gaps up I will most likely not chase and watch how it all unfolds. May miss out on the ramp up but on longer time frames such as the weekly it is clear that Nasdaq is struggling to hold its highs while spy is rolling over. Longer time frames have stronger push on prices than shorter. Be careful out there on the short side for the shorten week. With less days to trade the current week of option premiums will decay a lot faster, while also because more traders are likely going to avoid the market due to the holiday trade volume maybe low enough to easily get prices manipulated. Stay focus and hungry. Holiday or no holiday trading stocks is no panic. Best of luck.