Here's My Trading Approach for a Market That's Hard to Trust (original) (raw)

I continue to hold some core positions in these favored names.

It is another quiet day of action but with a positive bias.

Technology stocks and Microsoft (MSFT) and Amazon (AMZN) , in particular, are lagging, but overall breadth is running around 4,650 gainers to 3,400 decliners. Small-caps are leading with a gain of 0.6%, but there isn't any wild speculative trading. The number of 10% movers remains very limited, and groups such artificial intelligence are struggling to sustain momentum.

There is an odd mix of action right now. Overall the technical action remains positive, but there isn't any major chasing. There doesn't appear to be any real fear of missing out (FOMO), but the market continues to ignore the economic bears. While the bearish narrative is about as extreme as it gets, there hasn't been any confirmation in the price action that it is valid.

We have some data coming up Wednesday in the form of CPI, and then earnings season starts with banks on Friday. The big question is whether this news is finally going to confirm what the bears keep saying is going to happen, or will the market continue to shrug off the warnings of pending doom?

My approach to this is to stay patient and maintain high levels of cash. I don't feel as if things are going to run away from me, and I'm not worried about building up more sizable positions in stocks that I like.

My gut feeling is that this market is not going to just trend steadily higher. There are too many economic issues out there that will cause some elevated volatility in the months ahead. I want to use that volatility to my advantage in putting more cash to work. New buys here don't appear very attractive to me.

I continue to hold some core positions in favored names like Ceco Environmental (CECO) , Humacyte (HUMA) , Innodata (INOD) , Ocular Therapeutix (OCUL) , Origin Materials (ORGN) , IonQ (IONQ) , Sensus Healthcare (SRTS) , Beyond Air (XAIR) , Xeris Biopharma Holdings (XERS) , Rain Oncology (RAIN) , Viking Therapeutics (VKTX) , Emergent BioSolutions (EBS) , etc. I will trade all those positions short term but maintain core positions and look to build them up as technical conditions improve.

I don't have a high level of trust in this market, but I'm waiting for the price action to shift and indicate a stronger trend before I take action.

(Please note that due to factors including low market capitalization and/or insufficient public float, we consider some of these stocks to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)

At the time of publication, Rev Shark was long CECO, HUMA. INOD, OCUL, ORGN, IONQ, SRTS, XAIR, XERS, RAIN, VKTX and EBS.