By Nigam Arora
Investing and trading are about making money, and you should never let your political opinions get in the way. Irrespective of what you think of President Trump, Wall Street trusts him.
How does this affect you?
Let’s explore with the help of two charts.
Please click here for a chart of S&P 500 ETF /zigman2/quotes/209901640/composite SPY +1.33% , which tracks the S&P 500 Index /zigman2/quotes/210599714/realtime SPX +1.36% . For the sake of transparency, this chart was previously published and no changes have been made.
Note the following:
• The first chart shows a 1,300-point rise in stock market futures as Trump uttered two magic words. At a news conference, Trump said he will announce “very dramatic” actions to support the economy.
• With his two magic words, Trump quickly erased the fears that had led to a 2,000-point drop in the stock market. Are investors gullible?
• The second chart shows major support levels in the stock market. Technically, since the first major support level was not decisively violated, it was natural for the stock market to bounce. Please see “A watershed moment is on the way if stocks can’t hold this level,” which was written prior to the 2,000-point drop in the stock market.
• Our call was to take at least partial profits in the short-term trade on Nasdaq 100 ETF /zigman2/quotes/208575548/composite QQQ +0.45% short position and adjust stops to protect profits. A short position generates profits when the market goes down.
• Long-term investments should be handled differently from short-term trades.
Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.
When the Dow was falling by 2,000 points, fear mongering was rampant and few were looking ahead to the potential good news, I wrote: “It seems dark, but there is potential good news on the horizon that can reverse the stock market.” Please see “Stock market investors are asking ‘should I buy or sell?’ Here’s how to decide.” I identified several potential pieces of good news. Among the potential good news I identified, the following are coming true now:
• Massive fiscal response from governments. In the U.S., the response includes payroll tax cuts and paid sick leave for hourly workers.