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!
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.
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.
A morning gap down that whipsawed into the green only to be whipsawed once again to new lows is quickly approaching critical weekly index supports. If they fail to hold this selloff could get much worse very quickly. All eyes are on the FOMC and Jerome Powell,wondering if they will stick to their aggressive rate increase stance or if recent events will make them reconsider. If they raise, I suspect the weekly lows will fail. Should they begin to talk more dovish, the market could substantially rally.
Are you willing to gamble on that decision or will you stand aside to protect your capital? Every day I hear from struggling traders searching for answers as they watch their accounts chopped to pieces and suffering huge losses trying to trade the extreme volatility. If you find yourself consistently losing money then stop trading! You’re the boss so make the decision to protect your capital and wait for the market to stabilize. Cash is a position! Better days will eventually return, but if you lose all your capital trying to fight the market, you won’t be here to take advantage of it.
On the Calendar
On the Earnings Calendar,
we have 23 companies reporting today.
Notable today is FDX, MU, DRI, FDS, JBL, SCS reports.
Action Plan
In yesterdays note I suggested the possibility of a bounce. After the morning gap and some follow-through selling, we did get a bounce. Unfortunately,it lasted for only a couple of hours recovering the morning losses then failing at Friday’s resistance lows creating a double intraday whipsaw. When you look at the index charts its tough to anything but gloom with the financial and political news reinforcing that sentiment. Fear of the unknown is a powerful tool of the bears that have chased away any notion of a Santa rally this year.
As we rapidly approach weekly index supports the market is trying to send a strong signal to the FOMC and Jerome Powell to take a less aggressive approach to interest rate increases. Although it’s not the job of the FOMC to protect the market, they certainly played a part in this selloff. They have signaled a December rate increase is likely, but hopefully, they have received the message of the market and will reconsider. After that, we have the possible closure of the Federal government on Saturday if the Congress and President can’t agree on a budget. Be very careful and remember that cash is a position!
The market hates uncertainty and we this week we have an extra dose of political uncertainty to weigh on the mind of the market. While we watch and wait for new on China/US Trade negotiations, we have the FOMC rate decision and forecasts on Wednesday and the obvious tension that it creates as the market waits for the decision. If that’s not enough drama, we face the possibility of a government shut down on Friday if Congress and the Whitehouse can’t agree on the budget. The hanging point is the border wall so expect an none stop barrage of political spin for the market to chew on this week.
As I write this, the US Futures are pointing to a modest gap down at the open. It seems likely that the indexes will test lower supports but don’t rule out the possibility of a short-term oversold bounce to test the overnight futures highs. Although volatility remains high, there is a possibility of light and choppy price action as the market tests support levels and waits for the FOMC decision. As always maintain your discipline and say focused on price action an remember the next reversal may be just one news report away as the political uncertainty continues.
On the Calendar
We have 28 companies stepping up to report earnings this morning. Make
sure to keep up your due diligence as 2018 reports continue to wind down.
Action Plan
The Friday selling was disappointing but not all that shocking considering the political uncertainty that continues to swirl. On Wednesday, the market faces the question,will they are will they not decide to increase interest rates as originally expected? And then what do they see in the interest rate future with their FOMC Forecasts? If that’s not enough drama then keep in mind, the government could shut down on Friday unless the Congress and President agree on a new budget let alone the ongoing trade negotiations.
During the evening Futures were at one point slightly higher as the Asian indexes closed mixed but mostly higher. Unfortunately, European markets are all modestly lower this morning, and the US Futures are currently looking fora modestly lower open this morning, A test of lower supports seems very likely but don’t rule out the possibility of a bounce with T2122 indicating a short-term oversold condition. As the FOMC decision approaches to keep in mind that trading could become light and choppy as the market waits for the decision. As always stay disciplined and focused on price action.
A gap up and run of more than 450 points and a 3-hour selloff taking back nearly 300 before the close is a test of traders patience and discipline. Yesterday was the 5th huge daily whipsaw in as many days as the wild news driven volatility continues. This is a market for very fast and very skilled day traders and institutional algorithmic computers. So what is swing trader or position trader to do?
As hard as it may be, we must be patient and remain disciplined to our rules to protect capital and wait for our edge to return. Waiting is painful for most traders, but it’s far less painful than watching your money and confidence disappear trying to fight the tape. Obviously, this is very dangerous price action and if you find yourself losing money consistently for goodness sake stop repeating the same mistake expecting a different result. Like the old saying goes, If you find yourself in a hole, Stop Digging!
On the Calendar
On the Earnings Calendar,
we have 29 companies on the reporting today with ADBE as one of the most notable
after the bell.
Action Plan
As I write the US Futures are fluctuating between a slightly bullish open to a slightly bearish open but with Jobless Claims and Import/Export numbers out at 8:30 AM anything is possible by the open. Honestly, I was a little surprise because only 6 hours before futures were up 110 points! Let’s hope it can retest the overnight high later today. We can’t seem to get past the big price swings even in the overnight session following a roller-coaster ride yesterday which saw a rally of more than 400 points but gave back nearly 300 in the last 3 hours of trading.
With such wild volatility,we remain a very challenging day traders market, and we sit on the edge of our seat waiting for the next news driven reversal to occur at any moment. We all know better days will eventually return but the patience to wait for them is very difficult. Protect your capital and guard your confidence because both can easily evaporate during such volatility. Trading is a marathon, not a sprint so slow down and wait for your edge.
Another pop and drop pattern as yesterday’s 350 point gap finds only sellers amid so much political uncertainty. This morning futures are once again pointing an overnight reversal and gap up open of more than 150 Dow points. The question is will there be buyers there or will it meet with another round of selling? Almost every day I hear from traders that get caught up in the morning hype chase into the morning gap and watch their account getting chopped to pieces.
The fear of missing out is a powerful emotion, and it will destroy a trading account! Stop chasing,focus on the price action with discipline and patience and avoid all the news-driven drama. If the market gaps up wait until you see buyers supporting the gap before entering trades. If gaps down wait for proof that the sellers will support the bearish gap will follow-through selling. Until there is some resolution to all this political uncertainty volatility is likely here to stay so get disciplined or wave goodbye to your money.
On the Calendar
On the Earnings Calendar,we have 22 companies ready to fess up to their quarterly results today. Make sure you’re checking those reporting against current holdings.
Action Plan
Once again wild volatility plagued the market yesterday with another nasty whipsaw gaping up sharply at the open but finding only sellers. A Whitehouse press conference between the President and Democratic partially fueled the selling shining a spotlight on the political uncertainty we face going forward. However, Asian markets shook the uncertainty rallying sharply across the board on the possible easing trade tensions between the US and China. Europe is also currently bullish across the board this morning even as the British Prime Minister faces a no-confidence vote today.
As a result, the US Futures are once again pointing to a triple point gap up of more than 175 points. Will, there be buyers there today, or will sellers produce another pop and drop pattern? Only time will tell, and the best we can do is stay focused on the price action with discipline and patience. We should expect volatility to continue and very challenging trading until we can get past at least some of the politically generated uncertainty.
Extreme price volatility displayed emotions from gloom and doom to bullish euphoria which produced a whipsaw on steroids. The good news is with the futures pointing to a possible follow-through this morning a nice bottoming chart pattern is possible. The bad news is that very little has changed and the political uncertainty is likely to keep volatility high with challenging price action.
This morning’s open will be about 800 Dow points off of yesterday slow. If that, not the very definition of extreme volatility I don’t know what is! Don’t chase the morning with the fear of missing out. Wait to see if buyers step in to support the gap and remember a pop and drop is now out of the question. Plan your trades carefully and realize this wild price action will require a higher tolerance to risk.
On the Calendar
On the Earnings Calendar,we have 34 companies on reporting, but we drop off into the lower twenty ’s and teens as the 4th quarter winds down.
Action Plan
No doubt about it the wild ride continues with a massive whipsaw covering about 1000 Dow points from top to bottom and then bottom to top. Asian markets also had a very volatile night but closing mixed but mostly higher. In Europe, the Sterling continues to fall after delaying the Brexit vote, but currently, their markets are shaking that off and are bullish across the board this morning. US Futures went into the evening down also made a nice recovery overnight and are currently pointing to a gap up around 200 points.
That’s around 800 Dow points off of yesterday’s low so be care not to chase fearing you will miss out. Remember we want to make sure buyers will actually step in to support the gap after the open rather than profit-takers selling into strength an producing a pop and drop pattern. With the wild volatility it will be very difficult to find low risk entry positions so if you do trade keep in mind your tolerance to risk should must be carefully considered.
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.
After hearing the FOMC would take more of a wait and see approach to interest rate increases the indexes found support and producing a massive whipsaw rally. The QQQ managed to fill the gap while the DIA, SPY, and IWM fell just short of accomplishing that task. Unfortunately, the current Dow futures are pointing to another triple point gap down at the open as program trading continues to wreak havoc with massive volatility.
Congress did manage to avoid a government shutdown tonight but only kicked the can down the road for couple weeks leaving a big cloud of uncertainty as to what happens next. Additionally, trade negotiations between the US and Canada and the threat of a yield curve inversion add density to the uncertain clouds as we head into the weekend. Consider the massive volatility and the daily gaps as you plan your risk into the weekend.
On the Calendar
For the last trading day of the week, we have just 17 companies reporting earnings. Although the 4th quarter earnings events continue to wind down, we must remain vigilant checking report against current holdings.
Action Plan
After an ugly gap down yesterday markets managed to hold at key support levels after hearing that the FOMC will adopt a wait and see approach in regards to new rate increases. Yesterday’s slow grinding rally came close to filling the gap in the DIA, SPY, and IWM while the QQQ filled the gap and demonstrating the volatility remains very high. Unfortunately,the current futures market is pointing to another gap down around 100 points.
With so much wild volatility retail traders have much take a moment to think about the risk they carry into the weekend. Clearly, anything is possible as index and quant fund automatic trading algorithms continue to thrash market confidence. As for me except for the possible quick intraday trade I’m content to wait for the market to gain some stability. Weigh your risk carefully as the weekend nears and remember cash is a position often underutilized in times of such market turmoil. Have a great weekend everyone!
