Here’s a thought. It doesn’t matter why we rallied like we did off the March lows, but what really matters is what happens now. According to Bespoke, this most recent rally (using an up trending 50SMA) was the seventh longest since the S&P 500 has been around. I had no idea.
I do know that when adversity presents itself it’s what happens next that proves the heart of a champion. Historically, the three months following a break of the top ten streaks of that rising 50-day moving average, the $SPY had an average gain of 3.08%. Out of the nine times this has occurred, six were winners. The average of the three losses was -1.99% with the largest coming in 1986 (-3.80%). As an options trader I recognize that the odds suggest that we move higher. As an educated trader I also know that current circumstances in the market today are unprecedented and that alone trumps the odds.
I don’t know if we move higher or lower from here but I do know what to look for in the price action to help me gain an edge. I’m also prepared, as a proactive trader should be, to act accordingly when the opportunity presents itself. I love the opportunities the market presents on a daily basis and look forward to each trading day knowing that I’m prepared to participate. Some times I win and some times I lose, but I always use risk management and that allows me to come back and play the greatest game ever.