Forget the Election – Follow the Money!

Look at how quickly the news is changing…

The week before the election, it felt like investors were ready to throw in the towel as the averages quickly retreated.

Then, buyers stepped in with a vengeance right after Election Day, vaulting stocks off their lows. The Dow erased its losses and stormed higher by 7% on the week as of early Friday. Meanwhile, the tech-heavy Nasdaq Composite jumped more than 8% in just three trading days. Incredible!

As I’ve said over and over again since the market started to perk up off its March lows, you have to follow the money. The political backdrop is very clear right now: The Fed is going to do anything and everything to keep this market afloat. Like it or not, the Fed is on a buying spree! Don’t fight it! This money flow is unprecedented … and it’s going to continue.

Don’t get me wrong, we’ll always see some unwinding and profit taking when the market gets a little frothy. That gives us a chance to take a step back and reevaluate the risk-reward for new trades.

But you can’t get caught up in these negative headlines about the election, coronavirus, or any of the other scary storylines happening in the world today.

Remember, I’m viewing the market on a weekly basis. And I trade options so I can ride out the ups and downs and have some staying power when things get a little rocky.

With everyone so focused on the day-to-day action, I’m guessing that many investors failed to note that the S&P crept within just 2% of its all-time highs last week. We’ve continued to stairstep higher … an incredibly positive situation for the markets.

Don’t get lost in the narrative! There’s still plenty of opportunity to book gains in this market!

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Trading Tip of the Day: Pay attention to price, not the news.

Greg Guenthner

I feel like a broken record these days talking so much about why price action will always be more important than random financial media headlines. But it’s important to remember that market action is shaping the news right now. The tail is wagging the dog!

When stocks are powering higher, coronavirus concerns or the election have less of an impact. But when the market hits a snag, CNBC is ready with their doom-and-gloom headlines.

If you turned on financial TV and tried to trade the urgent market headlines, you’d end up selling the dips and buying the rips … a terrible combination.

You don’t have to cancel your cable or move to the middle of the woods where you can’t get high speed internet. Just keep in mind everyone’s priorities. Remember, the media is all about ratings, not helping you gain an edge in your trading!

— Greg Guenthner

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Alan hails from the home of options trading in Chicago, where he began working as a clerk on the floor of the Chicago Board of Trade (CBOT). Beginning with his days on the floor, Alan’s worked with all aspects of the options markets for the past 25+ years.

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