It’s the beginning of a new week — following a mega bullish couple of days on Wall Street… After the Federal Reserve decided to move forward with a rate hike — the first since December 2018 — and made a hawkish statement that it has at least six more hikes planned for 2022, stocks surged higher. However, despite what some traders might think about cashing in on the stocks trending up — and how much we needed this past week’s rally — now is the time to avoid chasing the stock market.
Chasing the market is normally used in a negative way to describe a trader who enters a new position far too late — making it impossible to benefit from the trade or capture big gains.
It’s synonymous with herd mentality, and both instincts have this idealistic notion of profiting from the current trend.
The problem with investors and traders practicing this tactic is the efficiency of the market — meaning all of the available information is already priced into stocks — makes it difficult to find sizable returns because you’ve already missed the boat.
So now — after following the biggest weekly S&P 500 rally since November 2020 — is the best time to avoid chasing the stock market.
But I’m already seeing some investors fall into the trap of the chase…
Why You Should Avoid Chasing the Stock Market: It’s a Losing Tactic
Toward the end of this past week, I started seeing a lot of the short-squeeze stocks of 2021 get chased by the retail community and new money.
And that has me concerned for the future of their portfolios…
So I wanted to start this week with a warning to all of my readers: Don’t chase the stocks that rallied last week with the intention of buying them this week.
Especially if you expect momentum to keep trending up like it is now.
We’re in a new downtrending channel of stocks in the S&P 500, and I expect us to test the 4,000 level in the next couple of months (we’re at 4,448 late Monday afternoon).
And you should expect another leg down soon, so don’t start chasing the stocks you wanted to buy last week — even if they just ripped double digits.
But in the meantime, there’s a certain level on the S&P 500 that traders should pay close attention to — it could be the perfect point for a breakout…
Watch the video below to learn more about why traders should avoid chasing the stock market this week.
And as always, send any topics you’d like me to cover to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
P.S. Here’s why WealthPress Senior Strategist Roger Scott’s not sweating this volatility…
Roger coded an algorithm designed to capitalize on ANY market conditions.
It isolates the top stocks in the market… which he calls “Super Stocks.”
