After hearing the FOMC would take more of a wait and see approach to interest rate increases the indexes found support and producing a massive whipsaw rally. The QQQ managed to fill the gap while the DIA, SPY, and IWM fell just short of accomplishing that task. Unfortunately, the current Dow futures are pointing to another triple point gap down at the open as program trading continues to wreak havoc with massive volatility.
Congress did manage to avoid a government shutdown tonight but only kicked the can down the road for couple weeks leaving a big cloud of uncertainty as to what happens next. Additionally, trade negotiations between the US and Canada and the threat of a yield curve inversion add density to the uncertain clouds as we head into the weekend. Consider the massive volatility and the daily gaps as you plan your risk into the weekend.
On the Calendar
For the last trading day of the week, we have just 17 companies reporting earnings. Although the 4th quarter earnings events continue to wind down, we must remain vigilant checking report against current holdings.
Action Plan
After an ugly gap down yesterday markets managed to hold at key support levels after hearing that the FOMC will adopt a wait and see approach in regards to new rate increases. Yesterday’s slow grinding rally came close to filling the gap in the DIA, SPY, and IWM while the QQQ filled the gap and demonstrating the volatility remains very high. Unfortunately,the current futures market is pointing to another gap down around 100 points.
With so much wild volatility retail traders have much take a moment to think about the risk they carry into the weekend. Clearly, anything is possible as index and quant fund automatic trading algorithms continue to thrash market confidence. As for me except for the possible quick intraday trade I’m content to wait for the market to gain some stability. Weigh your risk carefully as the weekend nears and remember cash is a position often underutilized in times of such market turmoil. Have a great weekend everyone!
Trade Wisely,
Doug
Comments are closed.