A single Speech

What a difference a single speech can make during periods of political volatility.  In what seems to be a dramatic policy reversal of trade the Chinese leader appeared to agree to all the Fair Trade points that have been made by the President.  Let’s hope words actually translate into an enforceable agreement that finally levels the playing field.  Clearly, this will take time, and there will still be considerable political jockeying, but at least for the moment, the market seems able to breathe a big sigh of relief.

All eyes will likely focus on the testimony in Congress by Mark Zuckerberg and what it could mean for the future of FB as well as other data-heavy tech business.  I wouldn’t expect a quick resolution.  In fact, we could easily see a lot of regulation and government over site in the months and even years to come.  Needless to say, it could be a bit stressful for those holding FB as this process unfolds.

On the Calendar

The Tuesday Economic Calendar kicked off very early this morning with a Fed Speaker at 4:30 AM and the NFIB Small Business Optimism Index.  The most important report today, PPI, comes out at 8:30 AM Eastern where consensus expects a modest increase of 0.1 in March however the high estimate is at 0.4%.  Remove food and energy, and the expectation is for a gain of 0.2% with energy and trade services up 0.3%.  Other reports not expected to move the market today are Redbook, Wholesale Trade, two bond auctions and another Fed Speaker at 6:30 PM.

The off Calendar testimony of Mark Zuckerberg at two Congress session will likely dominate the news today and could easily move FB stock and could affect another tech prices as well today.

On the Earnings Calendar, I see only 15 companies reporting earnings today, none of which are likely to move the overall market.

Action Plan

Yesterday produced a nasty whipsaw with the bulls moving the Dow up as much as 400 points only have the Bears come back in with a vengeance late in the day.  Then after the close, China extended an olive branch essentially saying they plan to make huge concessions on trade which of course created yet another whipsaw in the overnight futures session.  As I write this, Dow Futures are indicated to open sharply higher by more than 250 points.  If the words actually translate into a fair trade deal with China, it could dramatically improve the overall economic outlook in the US.  Let’s keep our fingers crossed.

With the big morning gap on fading trade concerns, a short squeeze could easily trigger pushing the indexes sharply higher.  Keep in mind however that just one Tweet or poorly worded comment could send the indexes reeling so stay on your toes.  Expect fast moving prices and whippy price action this morning as the market reacts.

Trade Wisely,

Doug

You have control.

In a market producing daily gaps, overnight reversals, and intra-day whipsaws it seems that chaos is now in control of a traders destiny.  Not true.  As the CEO of your trading business, you have control and are ultimately responsible for your trading decisions.  I have to admit this was a very hard lesson for me to learn and it cost me a lot of time and capital before the truth of that statement sank into my hard head.  I would blame the news, some talking head, earnings the President or anything else I could think of for the reason I was losing money during volatile markets.  The truth is the problem was me!

I was the one deciding to trade when there was no edge.  It was me pulling the trigger, and I was the one that needed to accept the responsibility of losing money when I was trying to fight a volatile market.  While it’s true someone is making money in the market every day that doesn’t mean your particular style or skills will.  If you feel like your fighting the market and consistently losing money, then you probably are.  You are in control.  Stop trading until the volatility subsides and your edge returns.  One of the hardest things in the world is to face the person in the mirror and admit you are the problem.  However, if your consistently losing money in this environment perhaps it’s time to have that face to face an realize you have control.

On the Calendar

We kick off the 2^nd week of March with a light day on the Economic Calendar with no expected market-moving scheduled.  We have three bond events and the TD Ameritrade IMX which intends to show how investors have positioned themselves in the market.  Keep in mind that the FOMC minutes come out Wednesday of this week.

On the Earnings Calendar, there are just over 34 companies expected to report earnings.  Although all earnings are important if you happen to hold or thinking of buying a company that’s expected to report, I don’t see any particularly market-moving reports today.

Action Plan

Friday was sure discouraging as the Bears overwhelmed the bulls closing the Dow down 572 points.  The good news is that four major indexes managed to hold above their 200-day moving averages.  The bad news is that each index closed the day with a bearish evening star pattern that produced another lower high in the current downtrend.

I have mentioned that the volatility created by political spin I consider to be one of the most challenging environments for traders.  Huge overnight reversals and nasty intra-day reversals can happen the instant a new spin from the media or tweet comes out which means retail swing traders have little to no edge.  Chart patterns and candle patterns which is the bread and butter for most swing traders only serve as traps that deliver big losses and chop up accounts in such a whippy environment.  Once again the overnight futures are producing a big gap and suggesting yet another reversal with the Dow currently looking to open 150 points higher.  With overnight whipsaws that are this extreme, trading is hard to distinguish from betting red or black on a Vegas Roulette wheel.

Trade wisely,

Doug

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Tariff tensions.

With more tariff slings and arrows launched between the US and China overnight, the market once again makes a big overnight reversal.  As the tensions escalate, traders will have a decision to make as we head into the weekend.  Do you hold and accept the risk of possible big Monday gaps or do you take close positions to avoid the risk?  A tough decision to be sure.

The Employment Situation report this morning is expected to show our economy is strong.  However, the market is also walking a tightrope here due to the possible wage inflationary pressures.  As in the Goldilocks nursery rhyme, we need the porridge to be just right, or additional market concerns could also contribute to market volatility.  One thing seems certain; big daily price fluctuations are likely here to stay at least for the short-term.

On the Calendar

The Friday Economic Calendar has only one market-moving report at 8:30 AM Eastern.  The Employment Situation report is expecting about 185,000 in jobs growth in March non-farm payrolls.  The unemployment rate according to consensus declines to 4.0% pointing to the full employment and the possibility of future wage pressures.   However, consensus only expects a 0.3% increase in hourly earnings with a yearly uptick to 2.7%.  Manufacturing payroll is expected to increase by 20,000 with the average work week coming in unchanged at 34.5 hours.  Consensus also sees the labor participation rate ticking higher by two tenths to 62.8%  We have three Fed Speakers today with first at 10:30 AM and the second speaking at 1:30 PM and last talking at 4:00 PM.

A rather light day on the Earnings Calendar this Friday with only 17 companies expected to report results.

Action Plan

After two nice days of the market rally on decreasing fears of tariff uncertainty, the White House stepped up the rhetoric asking for another 100 billion in tariff increases.  There was an instant knee-jerk reaction with the Dow Futures quickly sinking more than 400 points after the news release.  Of course, China quickly responded with reciprocal threats.  Throughout the evening the Futures markets rallied back significantly but at this time indicate the Dow could gap down about 200 points at the open.

Such political uncertainty will likely keep the markets nervous and price action very volatile for the foreseeable futures.  As I mentioned yesterday traders will have to plan for this additional volatility and carefully weigh the risk because these big overnight reversals can be very punishing to your trading accounts.  Maintaining an edge is all but impossible with such politically charged volatility.

Trade Wisely,

Doug

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