To The Moon

Year-to-date 2023:

S&P 500 +15.31%

Nasdaq +31.80%

Both the S&P 500 & Nasdaq Composite has had an extended run lately, largely boosted by the magnificent 7 of Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta & Tesla.

As price action suggests that when ever it stretches too far from its moving averages, eventually it will snap back and enter a correction phase.

Also, the volatility index (VIX) is below 15, indicating that traders are bullish. The VIX measures expected price fluctuations or volatility in the S&P 500 Index options over the next 30 days. The VIX often drops on days when the broader market rallies and soars when stocks plunge.

Of course the other possible reason is that the VIX is entering a multi-year low phase, which happens during bull markets.

Macroeconomic conditions aren't ideal yet

This is especially so considering that the Federal Reserve's fight against inflation has not ended, and they are calling for two more rate hikes to bring the Fed Funds rate to 5.5% to 5.75%. Also China's economy is not recovering as expected, and as such the People's Bank of China has cut one-year loan prime rate from 3.65% to 3.55% and trimmed the five-year loan rate from 4.3% to 4.2%.

What should you do if you have unrealised gains in the magnificent 7?

If you have unrealised gains especially in Apple & Nvidia, it will be tempting to take profits as they are both over valued.

But should an investor with long term horizons of seven or ten years be worried? It is typical that when the market is over extended, there will be times of profit taking from the market makers. But if the investor is saving to buy a house or a car in less than 1 year, now is the perfect time to sell, and then don't look back and regret after selling, the price went higher.

Always remember, a healthy price action involves wave up and wave down movements. Now is the time to sell if you are the type of investor who cannot resist taking profits.

@TigerStars 

@CaptainTiger 

$S&P 500(.SPX)$ 

$Invesco QQQ Trust(QQQ)$ 

$Apple(AAPL)$