With low volatility and indices that are moving slowly and steadily higher, the individual stock picker holds the upper hand. Take advantage of this stock picker’s market! I love these conditions. If I’m right more than wrong, willing to take some risks and analyze the technicals accurately, I can enjoy some nice wins, regardless of market performance.
Why is this a stock picker’s market?
A stock picker’s market is defined by:
- Low or declining volatility
- Few erratic movements in the put/call ratio
- Steady and relatively calm news
- Strong breadth
- Bullish price action
These are the conditions we find ourselves in now. Plus, we have a market-friendly Fed on our sides.
So here we are, in a liquidity-driven market. Money is flowing into stocks, because the probability for gains is higher than bonds, metals, cash or other asset classes.
A tweet or a brief news conference could trigger massive buying or selling by algorithm (algo) traders. Even with the current turmoil in the world, the current news cycle is not spooking traders.
Taken together, this conditions have created the current stock picker’s market.
So far in 2020, indices are up a solid 4.5% (give or take). Last year, indices were up 20% or more, so we are on pace for another strong year.
Some stocks are outperforming the indices. Look no further than Tesla, Amazon, Intel, Home Depot and McDonald’s. These stocks are up double digits or more for 2020, providing shareholders with spectacular returns.
Conditions can change with the snap of a finger (or tweet from left field). If your stock picker strategy is working, don’t get complacent. The markets may turn at a moment’s notice. Volatility could rise, breadth could falter and price action could turn south. Pay attention to avoid a disastrous situation.
For now, carry on and enjoy the opportunities that the current market is throwing your way.