Politically driven whipsaw.

It looks like yet another politically driven whipsaw this morning in Dow with the Futures currently pointing to more than a 100 point gap up at the open.  The good news is that the Dow managed to hold above the 50-day average yesterday as it struggles to find a balance amidst all the political uncertainty.  I believe a politically charged market is one of the most challenging to trade.  It can shift directions in half a heartbeat turning profitable positions into losers and vice-versa.

As traders become more and more frustrated, it’s easy to break discipline and begin to trade emotionally.  If you find yourself riding this emotional roller-coaster; try to focus on your trade plan and rules or stop trading until you can.  Remember trading is business, and there is no room in business for undisciplined emotionally charged decisions.

On the Calendar

It’s been a busy week on the Economic Calendar, and this Friday continues that trend with five potential market-moving reports.  Before the market open, forecasters expect Motor Vehicle Sales to hint at a strong month for retail with a 17.1 million annualized rate in May.  At 8:30 AM Eastern the Employment Situation consensus is calling for additional strength with a consensus of 190,000 new jobs created in May.  The unemployment rate holds steady at 3.9% while wage growth is only up a modest 1 tenth to 2.7 percent.  9:45 AM bring the PMI Mfg. Index where forecasters expect a 56.6 reading in May as orders continue to run at multi-year highs.  The ISM Mfg Index at 10:00 AM expects gains to 58.5 in May vs. 57.3 April report with strong growth for new orders continue.  Also at 10:00 AM consensus suggests Construction Spending rallied 0.8 percent in April.  We have a Fed Speaker at 8:55 AM and the Baker-Hughes Rig Count at 1:00 PM to close the calendar week.

On the Earnings Calendar, we only have 13 companies reporting today.

Action Plan

Another day of politically generated volatility with the Dow narrowly clinging its 50-day average by the close.  After waiting a month for a better trade deal, the President is keeping in his promise by imposing tariffs and steal and aluminum on Mexico and the EU.  Of course, nations have already fired back with new tariffs of their own as the negotiations continue.  Surprisingly markets are up around the world with both Asian and Europian markets showing solid gains.  As a result, the Dow Futures are pointing to a gap up open of more than 100 points as the index continues to whipsaw on a daily basis.  With the SPY, QQQ, and IWM all holding up quite well I continue to be cautiously bullish.  I wish you all a wonderful weekend everyone.

Trade Wisely,

Doug