How much risk are you willing to take heading into a weekend with so much political uncertainty?  A question that many traders will be pondering today as the congressional budget battle enters its last hours before shutting down the government.  Will they agree before midnight and how much capital are you willing to risk on their decision?  If they avert a shutdown, the market could be higher on Monday but should they fail it could easily be sharply lower.  A pretty big risk for hard earned capital.

As for me, I choose not to gamble on a political decision.  I will exercise my discipline and wait patiently for my edge to return and price action proof before risking more capital.  If by chance an agreement is made before the market close today, I will reevaluate and make decisions based on the price action, not speculation or prediction.  Until then I will protect my capital and rest well this weekend avoiding this ridiculous political uncertainty.

On the Calendar

On the Earnings Calendar, we have only 14 companies reporting today with KMX as the most notable.

Action Plan

Although the market seems currently oversold futures are pointing to more selling this morning.  Asian closed sharply lower and European markets are also under pressure this morning.  The border wall budget battle seems like it’s rapidly headed for a government shut down.  The President says he will sign the House version on of the continuing resolution, but the Senate says no deal.  Sadly this could be a very rough day of price action unless someone backs down and a government closure is averted.

We could bounce at any time yet at the same time the political uncertainty could easily drive the market substantially lower.  That makes for some very tough decisions regarding the risks of holding through the weekend.  I want to believe that cooler heads will prevail and a last minute deal will finally provide some relief to the selling, but I trade on price action proof, not hope and speculation.  An old saying comes to mind, “The market can stay irrational much longer than I can say liquid.”  Consequently, I choose to protect my capital until price action improves.  I wish you all a wonderful weekend!

Trade Wisely,

Doug

With a December rate increase and the two more expected next year, Jerome Powell is officially The Grinch who Stole Christmas.  Another wild day of price action with the Dow swinging nearly 900 points for the high to low.  Futures during the night were also very volatile falling an additional 200 points before bouncing and now suggesting a modestly higher open today.  Sadly with such wild price action, we can’t rule out the possibility that sometime during the day a test of the overnight low.

In the very short-term,we appear to be in an oversold condition, and a relief rally of sorts could begin at any time.  Unfortunately, with so much technical damage, extreme volatility and the holiday’s just around the corner any reaction higher could bring in more risk off sellers.  Keep in mind as the holiday’s draw near volumes are likely to decline as traders take time off to celebrate.

On the Calendar

On the Earnings Calendar, we have 34 companies reporting earnings.  Noteworthy Earnings Reports: CAN, BB, CAG, NKE, WBA

Action Plan

The Good: Indexes bounced slightly before the close at lower support levels. The VIX suggests fear is high but surprisingly held at price resistance.  T2122 indicates we are in the bounce zone and futures are suggesting a modestly higher open.  Last but not least Jerome Powell expects a strong economy in 2019.

The Bad: The indexes broke major support levels dropping sharply and quickly to test lower levels.  All four indexes have now entered the death cross with the DIA yesterday joining the other three adding to the technical damage.

The Ugly: With nearly a 900 point swing from high to low yesterday volatility remains very high.  With that in mind, we should not rule out the possibility of testing the overnight futures lows at some point during the day which is more than 200 points lower.  It looks like Congress is kicking the can down the road to February before making a decision on the budget which means the political uncertainty is likely to continue to plague the markets into next year.

As we head into the weekend, consider the risk carefully and know that anything is possible.

Trade Wisely,

Doug

The question of the day, What will the FOMC decide at 2:00 PM ET time today?  The world is watching, and pressure continues to mount as the WSJ the president and even Cramer have chimed in that the Fed should not raise rates.  However,the Fed Funds Futures suggest that there is better than a 70% chance that the FOMC will stick to its plans increasing the rate by 25 basis points.  Then there is the question of the FOMC forecast? Will  they continue with their aggressively hawkish stance or will they soften their outlook with a more dovish look forward.

As a trader, the truth is it really doesn’t matter what the Fed does or doesn’t do.  What matters is how the market responds to their decision and how we as traders react the price action. Currently, the Dow Futures indicate a substantial gap up of nearly 200 points.  We should expect substantial volatility and watch for possible full whipsaw reveals as we wait for the FOMC decision.  After the decision expect tremendously violent price swings, the market reacts all the way through the Chairman’s press conference.  Buckle up it could be a very bumpy ride!

On the Calendar

On the Earnings Calendar,we have 23 companies reporting earning stoday.  Among those reporting are GIS, PAYX, PIR, RAD, WGO as some of the most notable.

Action Plan

A budget deal in Italy,  some improvement in US budget negotiations and a possibly more accommodating FOMC is lifting the mood of US Futures this morning.  As I write this futures are suggesting a triple point gap up at the open.  The question is will the Bull be able to hold and defend the gap as we wait for the FOMC decision at 2:00 PM ET or will we continue whipsaw?  We should expect a volatile day and if you decide to trade plan to be very nimble and a substantial tolerance to risk.

Fed fund futures indicate better than a 70% chance that the FOMC will follow-through on their plans to raise interest rates by 25 basis points. If they do, does mean the market will necessarily fall?  No.  However, it will require to Fed to sound much more dovish in their forecast.  With the current state of the market, there is, of course, tremendous anticipation surrounding this event.  Expect extreme price volatility after the release the may reverse directions several times all the way through the chairman’s press conference.

Trade wisely,

Doug