The futures pointing to another gap down open the big question is will the bulls defend October/November price supports or will the bear’s seek a lower level.  Asian and European markets fell overnight on disappointing trade data and global growth concerns.  With so much political uncertainty weighing on the mind of the market we should expect volatility and challenging price action to continue for the near future.

As much as I would love to see the Bulls defend current supports, there is nothing in the current price action as of now suggesting that is the case.  In fact, an unbiased look at the index charts shows us the possibility of more downside if the current support fails.  If the Bulls do defend support, remember there is a lot of price resistance and technical damage above.  With volatility so high anything is possible so if you do decide to trade be willing to take profits and cut losses quickly.  Always remember that cash is a position and you do not have to trade every day to be a successful trader. 

On the Calendar

On the Earnings Calendar,we have 36 companies reporting earnings today to keep traders on their toes.  Continue the good practice of bouncing the earnings calendar against current holdings.

Action Plan

Futures opened yesterday afternoon and quickly fell 200 points but have slowly improved overnight. Asian markets closed sharply lower overnight on worse than expected trade data and European markets are lower this morning due to global growth worries. Consequently, the current US Futures markets are currently pointing to a modest gap down testing the strength of the November price supports but that could easily change as we near the open.  If the November supports do fail then watch for DIA 240, SPY 260, QQQ 157, support levels to be tested.

With the VIX closing on Friday above a 25 handle fear could easily transition into to panic if sellers remain in control and November supports fail.  As a result, we should expect volatile price action and higher option prices for the near future as political uncertainty continues to weigh on the market.  If you’re currently short, watch price action carefully for potential bounces off of support as reasons to take profits.  Also be careful not to chase short positions at or near price support levels.  If you want to be a buyer, don’t try to predict or anticipate the bottom.  That’s the job of the big institutions and keep in mind the bottom may still be lower. Wait for good price action signals before entering and prepare for volatility.

Trade Wisely,

Doug