Having Conviction and Waiting for Confirmation
Wed, Sep 1, 6:56 PM ET, by Zachary G. - Freshman Equities Trader, Hedge Fund Live
Today the market opened up approximately 3.5 handles and rallied modestly during the first half hour of trading. At 10:00 a.m. the ISM Manufacturing Survey hit the tape. This ISM is a survey among manufacturers regarding their outlook on current and future expectations for growth of their businesses. This leading indicator is considered one of the most important numbers released during trading hours. Last month, the survey came in at 55.5, solidly above a neutral score of 50 (scores below 50 typically indicate contraction in the manufacturing sector). For August, the ISM came in at 56.3, topping last month's figures and beating the estimate of 52.8. This print sent the futures rallying an immediate eleven handles to kick off a move catapulted the E-minis to close 30 handles above previous settlement. Once the initial spike had lost some of its momentum, the market drew several indecision candles, holding near its highs. We remarked that the longer we are able to sustain the move, the greater the likelihood the market would continue to follow the path of least resistance. As expected, the Spooz began to grind higher as every dip was met with greater buying pressure. During this time, Marc was responsible for controlling risk on $3mln of long value in Jeremy's book. As he watched the market rally and hold, he remarked that the market was not giving you any reason to sell stocks. Selling or shorting stocks on the belief that the move higher is overextended would simply be "taking a shot" given the absence of factual data to indicate we would begin a led lower. In fact, the market continued to grind higher throughout the afternoon forcing the shorts to sweat it out all day. Today provided a lesson in conviction and confirmation; have conviction in your trade until you see confirmation that you are wrong. Visit HedgeFundLIVE.com.
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