Bill Poulos is an investor, a published author, and president and co-founder of Profits Run, Inc. The company develops training through books, online courses, coaching, and trading software to guide traders on making smarter trades. Profits Run creates informative videos to teach individuals how to trade stocks and manage wealth. Poulos publishes books and articles to keep his clients well-informed on current economic trends. Profits Run and Bill Poulos established a website to motivate young people to be successful. He and his wife, Karen, enjoy giving back to their community. They live in Wixom, Michigan where Profits Run is headquartered. Below, Bill shares an analysis of the stock market.
After several weeks of continued volatility in the markets, this week we saw another non-deliberate and big moving week. While having big movements is not a big issue, it’s when the movements are inconsistent and swing from big moves higher followed by big moves lower. Much of the issues we are seeing surrounding the economy and trade seem to be the things that are igniting these moves.
This week saw the continuation of the trade issues with China as well as Mexico. These types of things cause uncertainty among traders and therefore cause the market to continue in their non-deliberate movements. The big news coming out today was the release of the Non-farm employment numbers. These numbers came out significantly worse that the forecast. The market was forecasting 177,000 but it came out at only 75,000. The unemployment rate came out as expected at 3.6%. This was the first time in a while that the employment numbers came out so bad. We will see how the market reacts or if this puts a damper on the rally in employment that we have seen with President Trump.
With these large swings in price, it is even more important to keep our levels of risk at appropriate areas. Consider both your single trade risk, one that tells you your maximum risk per trade you take, as well as your overall total portfolio risk, the one that tells you the total risk over all your trades. If you stick to these things you will never let a bad market turn your portfolio into a major loss.
This chart of the DJ-30 shows the weekly candles of what price has been doing. Notice the big up candle this week. After a fairly big down week last week, today we see that the price of the market has fully recovered. Price is also trading back above the 50 period simple moving average. Also, pay attention to the strong area of resistance overhead as price re-tests this area to see if it can continue to move higher or if we get a bounce back down. Either way, make sure you are watching to see what the price action does prior to making your decisions.
The SP-500, like the DJ-30 has bounced back strong this week to push back up towards the overhead resistance. The three prior tops seem to be significant points to observe as price re-approaches them. This strong resistance can be a place where we can look to take new trades, either as a long position on a breakthrough or a short position on a bounce back down.
The weekly chart of the NASDAQ seemed to be the most bearish of the three charts last week but has since had one of the strongest moves back up. We can see a similar area of resistance overhead, so we want to look at these areas to consider taking or placing new trades. As always, make sure you trade what you see, not what you think is going to happen.
This upcoming week may be a turning point in the direction of where price may be going over the longer term. Take some time to evaluate the trades you must make sure you are following what is happening in the overall markets. If you are trading against these strong trends, you need to be prepared to exit if they turn against you.