Yesterday’s rally was a tremendous relief from the selling pressure, but with the indexes thrusting up into price resistance levels all in one move, it also creates a tough decision for traders.  Do you buy with the fear fo missing out at the price resistance where a reversal back down could occur, or do you wait for a lower risk entry?  Tough decisions with a big week of economic data, coronavirus concerns, and massive political dramas on several fronts adding a hefty dose of uncertainty to the mix.  Choose carefully because the next big swing could occur at any time.

Asian markets closed the day mixed but modestly higher in a choppy session, reflecting the uncertainty ahead.  European markets after a big relief rally yesterday are in pulling back with Brexit issues and US politics, creating a bit of caution.  US futures pulled back from evening highs, shifting slightly negative, but as we approach the open, they have become quite choppy ahead a light day of earnings reports and economic data.

Economic Calendar

Earnings Calendar

On the Tuesday earnings calendar, we have a light day with just 11 companies reporting quarterly reports.  Notable reports include INFO, MKC & MU.

News and Technicals’

I’m running behind this morning, so this will be a short and sweet report.  Yesterday was a nice rally, but unfortunitually, it didn’t change the technicals of the index charts.  Pushing back into downtrends and price resistance can easily make us feel as if we’re missing out, and we make the mistake of buying at price resistance and breaking our trading plan rules.  Though this could be the beginning of a rally that will extend higher, it could also be nearing the high point or failure point to continue the existing downtrend.  Big tech seems to have the best chance of leading us higher, but the high price volatility, morning gaps, and overnight reversals require us to have a higher tolerance for risk. 

The T2122 indicator went from oversold to nearly overbought in one fell swoop, and one has to consider the possibility that a similar reversal back down is equally possible.  That creates a significant conflict in a trader between the fear of missing out and large potential losses that can quickly occur with such high volatility.  The only way I know to resolve that conflict is to stick to your plan and follow your rules.  Remember, your plan helps you make money; your plan helps you protect your capital.  We have a lot of data coming our way in the next few trading days, so plan your risk carefully and expect the wild price volatility to continue for the foreseeable future.

Trade Wisely,

Doug