Political Volatility

I have mentioned how challenging politically motivated volatility can be for traders.  The cruel overnight reversal triggered by a single Tweet is evidence of how damaging it can be to a traders account.  As technically, analysts, we try to maintain an edge through the study of price action.  Unfortunately, that edge completely disappears during periods of political uncertainty.  Very fast and experienced day traders can make hay in this kind of environment and investors simply ride it out.  It’s the swing trader that’s particularly disadvantaged by the violently shifting sentiment.  During times like this holding on to an edge is a bit like trying to rope the wind.

On the Calendar

The Wednesday Economic Calendar has several reports that the market could get a reaction from today.  At 8:15 AM Eastern ADP Employment report is looking for a slow down in job gains to 185,000 vs. 234,000 reading in February.  The Factory Orders at 10:00 AM is looking for a solid rise of 1.7% adding to the impressive strength of the February reading.  Also at 10:00 AM the ISM Non-Mfg Index is to continue showing strength with an expected reading of 59.0 today according to consensus.  Then at 10:30 AM we will get the EIA Petroleum status numbers which do not forecast forward but certainly have the power to move the market substantially.  Filling out the rest of the calendar we have the PMI Services index which is not expected to move the market as well a 2-Fed Speakers to be aware of at 9:45 and 11:00 AM.

We have only 36 companies on today’s Earnings Calendar.  Most notable is the report from CAR before the bell, and after the bell, we will get results from the home builder LEN.

Action Plan

Yesterday we had some sweet relief as the bulls started the day positive and continued to push higher steadily higher through the day closing the Dow up 389 points.  Unfortunately, all that good work looks to be completely reversed this morning as the Trade War rhetoric heats up.  As I write this, Dow Futures are pointing to a 500 point gap down as both the US and China issue threats of new tariffs.

As I mentioned earlier this week politically inspired volatility is a very challenging environment in which to trade.  Violent reversals that shift the course of the market, with the efficiency of the instant news cycle.  Swing traders are disadvantaged in such an environment which is clearly evident this morning.  Keep in mind the market could change again with the speed of a Tweet so plan your risk accordingly.

Trade Wisely,

Doug