During the Trump administration, the US stock market presented a wonderful sight: there was always a large sell-off out of concerns about destabilizing factors, such as the conflict with North Korea, the resignation of Gary ▪ Cohen, the former director of the White House National Economic Council, and a potential trade war with China, but it was always followed by a dramatic recovery and rebound, and a new look of growth.
This morning, we saw this kind of twists and turns again. Us Treasury Secretary Stephen ▪ Mnuchin said that the United States and China have reached an agreement on a framework, and the United States will temporarily "shelve" imposing tariffs on Chinese goods in order to reduce the US trade deficit with China.
It is conceivable that the development trend of this trade war is difficult to predict. However, this is great news for the stock market, which also ushered in a "high jump" this morning. The Sino-US trade war has been temporarily eliminated, and then there will be endless "experts" to analyze and predict the incident, but it is more important for us to know what action should be taken to deal with the current situation.
In the past few weeks, the stock market has experienced unusual changes. The Russell 2000 ETF hit a new high, while the S & P and other major indices were wobbly and mediocre. This is a good opportunity for stock pickers, and many financial media have underestimated the stock rally in some industries.
However, Quantifiable Edges, a financial analysis firm, points out that the rise in small-cap stocks doesn't mean anything. Stock market bulls see this as a sign of recovery, while bears see it as a sign of excessive speculation-but neither side has strong data to support their views.
The key question is whether the current "jump gap" can be made up. Will the gap between large-cap stocks and small-cap stocks get smaller and smaller?
The traditional rule of trading is: don't chase the rally to open on Monday morning. However, this rule has been gradually broken in recent years. But there is one thing we have to figure out: is there really positive purchasing power in the market, or is it just speculators selling at high prices? Many traders will use such a method to judge: after the jump gap appears, wait an hour or two to see if the index will rise. If there is positive purchasing power in the market, the initial wave of selling will soon be overshadowed by new buying behavior.
At this time, we will be faced with a complex problem: small-cap stocks have expanded rapidly, and we must see whether this gap will lead to the rise of related large-cap stocks, Internet technology giants and other stocks that have lagged behind recently. Traders need to switch their trades quickly if they want to catch up with the new uptrend.
We will also continue to pay attention to the subtle role between small-cap stocks and large-cap stocks, so as to make the right choice in the ever-changing stock market.
(this article is produced by Futu Information compilation team, compiled / Feng Fan, proofread / Yang Weiyi)