Did the stock market just rally before a crash?

The US stock market has just experienced a remarkable turnaround and now is the perfect time to ride the wave of gains. With the S&P 500 and Nasdaq on a winning streak, there’s a clear opportunity to make strategic moves. Here’s how you can take advantage of this momentum.

US stocks surged to session highs on Monday, continuing the strong upward momentum from last week, which marked the best performance for the market in a year. This rally is a stark reversal from the early August downturn that had traders on edge.

The S&P 500 gained nearly 1%, while the Dow Jones Industrial Average added 0.6%. The tech-focused Nasdaq Composite saw the largest increase, rising over 1.4%. Leading the charge were Technology and Consumer Discretionary stocks, with the S&P 500 extending its winning streak to eight consecutive sessions—its longest since November last year. The Nasdaq also marked its eighth straight day of gains, buoyed by significant rallies in Nvidia (NVDA) and Tesla (TSLA).

This upswing follows last week’s impressive gains, which helped the market recover from earlier losses in August. Traders’ fears of an impending recession were alleviated by encouraging data on inflation and consumer spending, sparking renewed optimism.

As the market shifts focus to the upcoming speech by Fed Chair Jerome Powell at the Jackson Hole symposium, there’s growing confidence in a “soft landing” for the economy. Goldman Sachs has even reduced the probability of a recession. The key question now is not if the Federal Reserve will cut interest rates in September, but by how much.

Current market sentiment, as reflected in the CME FedWatch tool, suggests a 72% chance of a 0.25% rate cut at the September meeting, with a 28% likelihood of a more aggressive 0.50% cut. However, the release of the minutes from the Fed’s July meeting on Wednesday could influence these expectations.

Traders will also be monitoring the Democratic National Convention, which begins Monday, for any potential impacts on market sentiment, particularly regarding the presidential campaign of nominee Kamala Harris.

Conclusion

For traders looking to make the most of the current market rally, now is the time to stay informed and act decisively. Keep an eye on key economic events, such as Fed Chair Powell's speech and the release of the FOMC minutes, as these will provide critical insights into the direction of interest rates and overall market sentiment.

Indices are high right now, and as the old saying goes, buy low, sell high. Selling plunging assets during a crash can be seen as a hedge against the economy, but it can also generate attractive results. A well-time sell order could generate epic results, but if you Short too early, your account will suffer as volatility rises before the reversal. Be cautious, be skeptical of everything, but have your lifejacket close by for when the boat starts sinking.