The Fed meeting is coming with a bang, and geopolitical conflicts are intensifying. How should we respond?
Timing is crucial in the U.S. stock market now, as unexpected events occur frequently. The conflict between Israel and Iran has led to a flood of good and bad news, making it hard to discern the truth. Additionally, Trump keeps tweeting and getting involved, further complicating the situation. As a result, the market has been extremely volatile.
Especially at the open, some hot stocks may suddenly surge, only to be sold off later, trapping investors. In such cases:
First, avoid blindly chasing highs. The first hour after the open is typically when institutional and quant funds battle it out. Unless the broader market is collectively strong, individual stocks are prone to pull back after an initial spike.
Second, always protect your account. The market is currently in a bit of a prisoner's dilemma. When a stock suddenly surges in minutes, someone will inevitably dump it. That's why we've seen hot stocks recently open up 10% or more only to be sold off, and 7-8% pullbacks are now common.
Third, the S&P 500 components are highly divergent. If you're holding too many losing stocks, your portfolio structure is problematic, and you should immediately reduce positions to preserve cash.
NVIDIA is stuck at the 145 resistance level, unable to break through. Market sentiment is increasingly cautious, with many waiting for the Fed to signal its next move. Reuters leans toward a September rate cut, with no change this time.
The market is watching Powell's stance—whether he maintains the expected two rate cuts (dovish) or expresses optimism about economic data. Since blaming Trump is inevitable, his economic assessment will be key.
If the tone is dovish, the market will likely rally. But any hint of concern could trigger a sell-off.
As retail investors, we can't compete with institutional quant strategies. The best we can do is prepare early or even reduce positions ahead of time and wait for signals.
Uncertainty in the broader market is real. That's why I advised reducing positions last week when the Israel-Iran conflict flared up.
Be especially careful with stocks bought at highs. Small positions are fine, but don't rush to average down. Under Trump, 7-8% swings in individual stocks are routine, and double-digit moves are common.
CRWV surged yesterday. As explained in my video, the hourly breakout was a good signal, and I positioned accordingly, sharing it in the community. But its sudden rise also reflects a lack of other market themes, so hot money flowed into it.
The semiconductor sector has had plenty of good news lately. AMD, for instance, has been on a roll, as shared in the community. Marvell also raised its full-year guidance at yesterday's AI investor meeting—a very positive outlook, as discussed in the community. But with the broader market stuck, semiconductors may just follow its lead.
If the market pulls back due to Fed uncertainty, semiconductors could still shine later. Look for opportunities to position.
2025 will be a volatile year, digesting the gains of the past two years. Discipline is paramount, so plan your position management carefully. Those who can maintain strict discipline should consider joining our community.
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