Ep. 295 Overthinking The Market? How To Improve Your Trading Decisions And Stick To The Charts
Investing With IBD
Deep Dive
Why did the market react positively after the recent election despite initial fears?
The market reacted positively because the election uncertainty was resolved quickly, and the outcome was perceived as a non-event. Many investors had already hedged their portfolios, anticipating volatility, but when the market showed strength, those hedges were removed, leading to a chase trade.
What is Joe Fahmy's approach to handling known events like elections in his portfolio?
Joe Fahmy suggests that the approach depends on the investor's timeframe and risk tolerance. For short-term traders, reducing position size or hedging can be beneficial. However, for long-term investors like Warren Buffett, such events may not significantly impact their strategy.
What does Joe Fahmy believe drives the market more than political events?
Joe Fahmy believes that earnings and interest rates are the primary drivers of the market, not political events. Strong earnings and the Fed's liquidity measures have a more significant impact on market direction than who is in office.
How does Joe Fahmy suggest managing portfolio risk during uncertain times?
Joe Fahmy recommends being flexible and adaptable. He suggests reducing exposure or hedging during uncertain times but being quick to remove those hedges once the uncertainty resolves and the market shows strength.
What is Joe Fahmy's view on the current market trend since September?
Joe Fahmy notes that the market regained its 50-day moving average in September, signaling a new power trend. He observes that many sectors and stocks have been performing well, indicating a healthy market environment.
Why does Joe Fahmy emphasize the importance of the 50-day moving average?
Joe Fahmy emphasizes the 50-day moving average because it is a key indicator of institutional support. When the market is above this average, it suggests a healthy uptrend, while being below it may indicate a need for a more defensive approach.
What does Joe Fahmy think about the current state of small-cap stocks compared to large-cap stocks?
Joe Fahmy notes that small-cap stocks are still struggling to break past their 2021 highs, while large-cap stocks have already surpassed those levels. He prefers to focus on the stronger relative strength in large-cap stocks for now.
What sectors is Joe Fahmy currently watching closely?
Joe Fahmy is paying attention to the software sector, as evidenced by the performance of the IGV ETF. He also notes that AI-related stocks, such as NVIDIA and Vertiv, continue to show strong fundamentals and technical setups.
What are the three stocks Joe Fahmy is currently monitoring for potential opportunities?
Joe Fahmy is monitoring NVIDIA, Vertiv (VRT), and Tesla. He believes these stocks have strong potential but advises waiting for better entry points rather than chasing current highs.
Why does Joe Fahmy recommend patience when entering new positions in strong stocks?
Joe Fahmy recommends patience because many stocks are currently extended and may pullback to more favorable entry points, such as the 21-day moving average. Chasing stocks at current highs can lead to poor risk management.
- Hedging strategies during major events
- Importance of risk tolerance and timeframes
- Adaptability in investment approaches
Shownotes Transcript