One year price targets of stocks suggests investments.
Russell 2000 is currently about 5 standard deviations above its yearly moving average based on weekly charts. This suggests to me equities are very “Top of mind” with investors right now. Of course, easy money and other economic stimulus provide fuel for market advances. However, stimulus efforts are based on concerns of our economy. The basis for these concerns extend beyond Covid. There are significant demographic challenges for developed countries because of aging Baby Boomers, resulting in lower productivity and increased challenges for younger generations entering the work force. There are sociological and systemic challenges related to automation. Debt levels are at historic highs relative to earnings power of many levels of Government in the US, a large number of businesses, and a large number of individuals. Many households in the US do not have enough savings to last one month of lost income before missing a mortgage payment. International Governments, including the United States, are looking to raise revenue by fining foreign companies, resulting in an escalation of legal actions against many large corporations. This may ultimately adversely affect foreign relations, including trade, business confidence, along with possible reduction of capital spending and hiring.
In other words, I don’t see stocks as investments.
On the other hand, one does not want to argue against a trend in one’s trading timeframe. Therefore, I trade on a short term horizon where trading with short term momentum is key. Long, short, it does not matter to me. I may anticipate areas where momentum is likely to peter out, attempt to identify an early trend change, or look to enter a recently established trend on a correction. In other words, my focus is mostly technical in our current trading and economic environment. All of my overnight strategies use options to define my risk. Although I tend to trade too conservatively, I will open things up on high confidence trades. There will probably be at least a dozen great setups in the coming year. It is taking advantage of those setups while avoiding large losses that will enable me to earn outsized returns.
