Friday's Market Minute: Is It Time To Buy The Momentum?

Stocks continue to march higher as earnings season has given another boost to U.S. markets in another ‘Risk-On’ move into equities.

The S&P 500 is up over 20% this year, but still only 6% higher from year-ago levels due to the December sell-off. Volatility is in its historically low summer range with the VIX in the $12 handle as complacency takes hold. Investors are buying dips again with a dovish Fed and better-than-expected earnings driving stocks near record levels.

Is it time to buy the momentum in the equity market, or should you start to protect some of the 2019 gains? With option volatility at low levels, buying protection or speculating for a reversal may be the prudent move if your assumption is turning neutral to bearish. Volatility should increase next week into the FOMC announcement on Wednesday with the expectations of an interest rate cut at 100%. Economic data has been decent and the consumer continues to drive the U.S. economy, but investors are also leaning on the Fed for accommodation.

Positioning yourself for the latter half of the year may be a tough decision, but many on Wall Street may once again look past the headline risks and continue to pile into stocks. The ‘Risk-On’ outlook can quickly turn into a ‘Risk-Off’ scenario so prepare accordingly for a potential slowdown or reversal into the fall.

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

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