Short-term stock price movements have more to do with emotions than any sort of fundamental factors.
Think about it… The S&P 500 doesn’t move dramatically up or down in a day because business conditions changed suddenly. The movements happen because investors’ emotions changed. They got more optimistic or pessimistic. And it’s those shifts in emotions that create the short-term movements we’ve come to call “volatility.”
We’ve never had a president who was more adept at evoking emotions than the one who took the oath on Monday. Love him or hate him, President Donald Trump – in every speech, posting on Truth Social, and tweet – stirs up emotions. Those emotions work their way into stock prices and create the sort of volatility that traders can take advantage of.
For example, just prior to Election Day, the S&P 500 was trading near 5800. And last week the index traded near 5800. If you had fallen asleep on November 4 and woke up last Monday, you might think nothing happened.
Of course, we know otherwise. The S&P 500 had a dramatic 300-point rally following the election results. The index then had a dramatic 300-point decline – leaving buy-and-hold investors in the same spot.
But traders had a chance to profit.
And that is the sort of environment we’re likely to see at least for the next 100 days, and possibly for the next four years.
It will be a frustrating environment for investors. But it will present a fantastic opportunity for traders.
We’re likely to see extreme levels of volatility in almost every sector and asset class. Just since the election, we’ve already seen larger-than-average moves – in both directions – in Treasury bonds, oil, cryptocurrencies, stocks, gold, and commodities.
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And it’s just the beginning.
Trump has said he wants to hit the ground running. He wants to make his first 100 days the most proactive of any administration in history. For traders, that means more emotions and volatility… and opportunities to profit.
In fact, if we do it right, Trump’s first 100 days could be The Most Profitable 100 Days of Your Life.
Please join me today for a special presentation where I outline my trading plan for the next 100 days – and perhaps the next four years. It starts at 1 p.m. ET. And it’s free.
Best regards and good trading,
Jeff Clark
Editor, Market Minute