Trade war gloom.

As gloomy as the charts may seem just keep in mind that one day the selling will stop and there will be great companies at offered up for a nice discount.  Let’s also keep in mind that the economy is still showing tremendous strength; labor demand, manufacturing growth, and consumer confidence are near record levels.  The selling right now is politically motivated and will eventually pass because there is one thing for certain.  Politicians always want to be reelected, and a compromise will eventually happen so they can ride in on their white horses to save the day.

On the Calendar

We wrap up this week’s Economic Calendar with two important reports.  At 8:30 AM Eastern is the Durable Goods report which according to forecasters will bounce back 1.7% in February.  Capital goods should rise about 0.7%  and remove ex-transportation is expected to show a solid gain of 0.6%.  New Home Sales numbers at 10:00 AM is expected to come in with a strong 620,000 annualized vs. January’s reading of 593,000.  We have Fed Speakers at 10:30 AM and 11:30 followed by the Oil Rig count at 1:00 PM to finish off the calendar week.

On the Earnings Calendar, there are only 24 companies expected to report, and I don’t see any that would be particularly market moving.

Action Plan

The bears hit the ground running yesterday with about a 200 point gap down at the open as a head start.  After fall 500 points there was a brief rally, but tough tariff talk brought the bears back in force closing the day down 724 point in the Dow.  With yesterdays selloff all four of the major averages are now below their 50-day moving averages.  Future markets this morning are only adding to the pain currently pointing to 100 point gap down, but that is an improvement from the overnight lows if you’re looking for a little silver lining.  The SPY only has about 57 points to reach the 200-day average while the Dow would need to drop another 600.  I know no one wants to see that happen but it sure looks like that’s a good possibility.

If your short, congratulations, its time to watch for clues of a relief rally to take some profits.  Those standing aside stay focused on price action, manage your watchlists and prepare.  The selling will eventually end there will be nice discounts prices on good stocks when it does.

Trade Wisely,

Doug

Stop Digging

I have the privilege of working with a lot of traders from all over the world.  A common theme I’ve heard over the last couple months is that many are seeing their accounts chopped to pieces.  I hear things like; Everything that was working last year is now delivering a lot of losses.  What they have failed to recognize is that the market has changed and they have not adapted to the change.  There is an old saying, “if you find yourself in a hole, Stop Digging.”  The market has changed and has become very challenging even for very experienced traders.

If you find that the market is handing you one loss after another, then it’s time to stop digging and reevaluate.  If you have no “edge,” then your likely only providing liquidity to those that have adapted.  Stop, reevaluate, wait for your edge to return or adapt your trading to the current market conditions.  The only alternative is to watch your capital disappear along with your dreams of financial independence.

On the Calendar

The Thursday Economic Calendar is a full-one, but there are only two potential market-moving reports today.  First is the 8:30 AM Jobless Claims that consensus expects to decline 1000 to 225,000 as labor demand continues to be steady and strong.  Secondly, we have the PMI Composite at 9:45 AM which consensus suggests will remain strong at 55.2 with PM Manufacturing at 55.7 and PMI services at 55.7.  Reports today that are not expected to move the market, FHFA Housing Price Index, Consumer Comfort index, Leading Indicators, Natural Gas report, Kansas City Manufacturing Index, Fed Balance Sheet, Money Supply, and 8-bond related events.

The Earnings Calendar shows 84 companies are expected to report earnings today.

Action Plan

When I ran out early yesterday for an eye doctor appointment, the price action was still whippy but leaning slightly toward some hopeful bullishness.  Sadly the bulls were unable to hold on to that bullish sentiment with only the IWM managing to close the day positive.  It would seem jitters over additional tariffs, and the potential of a trade war with China is to blame.  Yesterday I mentioned that the indexes were sitting at the edge of a very big cliff and it wouldn’t take much to push them over the edge.  With the Dow futures pointing to more than a 150 point gap lower this morning, it would appear tariff fears could give us that push.

Remember big morning gaps can often create whipsaws and very fast price action.  Be careful not to chase the gap.  The next visible price support lower on the Dow is still several hundred points away.  If the bulls don’t fight back hard, we could experience another significant selloff today.  Protect your capital.

Trade Wisely,

Doug

What if?

Waiting is never fun.  It allows the mind to wander through all the “What If” scenarios and invites speculation of the unknown.  The financial media will do it’s it part to whip up the emotion with dramatic headline graphics and bumper music that would make Hollywood jealous.  What does all that drama and speculation accomplish?  Nothing but make us emotional.

The “what if” game is endless and unproductive.  We still have to wait for the FOMC decision, and no one knows what that will be until its released.  Will they add additional interest rate increases to the forecast?  We will find out at 2:00 PM Eastern and no amount of talking head conversations will change that.

What we can do as retail traders is prepare.  If you’re very nervous about the announcement, then perhaps your over-trading and need to make some adjustments to your risk.  If you’re new to trading or lack sufficient experience for such events perhaps standing aside is your the best course of action.  Work to make good business decisions without bias or prediction and be prepared to react without emotion.

On the Calendar

A big day on the Economic Calendar on this hump day.  We get started with important reports at 10:00 AM Eastern when Existing Home Sales which consensus expects a slight increase to 5.420 million annualized rate.   At 10:30 AM the Petroleum Status Report which as recently shown a decline in supplies helping to bolster oil stocks ever so slightly.  After that it’s all about the FOMC Announcement at 2:00 PM along with the FOMC Forecasts.  Then at 2:30 PM the newly seated Chairman Powell will have the entire world focused on every word he utters during the Press Conference.

On the Earnings Calendar, there are 56 companies expected to fess up on their quarterly results.

Action Plan

Today the entire financial world will be focused on the FOMC and what our new Fed Chairman will have to say at the press conference.  Based on his introduction speech where Chairman Powell seemed to lean hawkish has the market speculating more interest rate increases in the FOMC forecast.  Interest-sensitive securities have experienced some selling this week in anticipation of this report.  It’s understandable that the market is pensive as we wait for their decision but all the speculation is, and drama is a waste of time.  As retail traders, all we can do is wait for the decision and react once the decision is known.

I’m expecting choppy price action ahead of the 2:00 PM announcement.  However, after the release of the statement and forecast, we can expect very wild price action as the market reacts.  Today is likely too much more volatile than we have recently experienced.  Currently, the futures are pointing to a mixed open.  The spooky thing is that the DIA and the SPY are sitting right on the edge of a very steep cliff.  Any miss step or poorly chosen word could easily push them over the edge.  Let’s hope that’s not the case and instead that Chairman Powell offers a steady hand that prevents a fall.

Trade Wisely,

Doug

Fear

The data breach in FB coupled with the unknown of the coming FOMC decision gave the bears just what they needed to strike fear into the hearts of traders and investors.  Fear is only of those powerful emotions that can quickly create a lot of technical damage and make our jobs as trades that much more difficult.  When we allow fear to creep into our trading, it diminishes our ability to make good trading decisions.  Remember trading is a business, and just like any other business emotional decision making has no place in business.  Emotional trading is like cancer relentlessly eating away your capital.  The good news is this cancer is curable with a simple trading plan with a set of rules designed to protect you from YOU!  If you don’t have a plan, stop trading until you do or continue to watch your capital disappear.  You are the CEO of your business and solely responsible for your results.  The choice is yours.

On the Calendar

The very light Tuesday Economic Calendar biggest highlight is the beginning of the 2-day FOMC meeting.  Other than that we have the Redbook at 8:55 AM and a bond auction at 11:30.  None of which would be expected to move the market.

The Earnings Calendar shows 52 companies are expected to report today.  FDX is the most noteworthy report of the day that releases results after the bell.

Action Plan

Yesterday saw some ugly price action as traders and investors choose to dump positions.  Some point to the selling on FB as the catalyst for the bearish day, but I think jitters ahead of the FOMC interest rate policy announcement is more likely to blame.  Whatever the cause, yesterday delivered serious technical damage to the SPY and DIA charts and spiking the VIX over 20% as fear seemed to overwhelm the market.  The QQQ managed to hold onto its 50-day average but sadly broke some important price supports as well as the current uptrend.  Small caps seemed to fair the best not only bouncing strongly off the IWM 50-day average but also recovering important price support by the close of the day.

As I write this, Futures markets a mixed with a slight bearish bias.  With no major earnings or economic reports this morning the market will have little more than its nervous emotions to chew on today.  If the Bears step in with some, follow-through selling fear could quickly turn into panic.  On the other hand, if the Bulls step up to defend critical price supports, then we have a chance of repairing some of the technical damage created by yesterday’s selling.  With the FOMC announcement on Wednesday afternoon, choppy price action is likely.  Couple that with rising volatility and we have the potential of wide range chop with fast whipsaw price action.  Plan carefully and protect your capital.

Trade Wisely,

Doug