The Good, The Bad and The Ugly

Can we go back to 2017?  So far 2018 has tossed at us The Good, The Bad and The Ugly in the time span of just over one month.  The Good, record highs and tremendous bullishness for the first 25 days of the year.  The Bad, last Friday’s nasty selloff of nearly 700 Dow points.   The Ugly, yesterdays record-breaking one-day selloff that wiped out all the progress for the year and then some.  So what happened?

Fear got a little out of control yesterday as the market watched Bond Yields rising rapidly and topping 2.8% by the close.  The market has also suddenly become hyper-aware of inflation and what that might mean for interest rates going forward.  As traders, we always try to compartmentalize the cause of such events to and make some sense of it all.  But the truth is when markets are euphoric or panic-stricken, it rarely makes sense.  Unfortunately this emotional roller coaster and last much longer than one would expect.  The only way to protect yourself and your capital is to stand aside and let it pass.

On the Calendar

The Tuesday Economic Calendar kicks off with International Trade at 8:30 AM.  Sadly the trade deficit is expected to widen sharply to $51.9 billion.  At 10:00 AM the JOLTS report is looking for a slight gain to 5.900 million today according to consensus estimates.   The is a Fed Speaker at 8:50 AM and some bound auctions to complete today’s calendar.

Today is a pretty big day on the Earnings Calendar with about 150 companies scheduled to fess up.  Today, we will hear from GM, DNKN, DIS, GILD and CMG just to name a few.

Action Plan

Futures have been moving very quickly and all over the map during the overnight session.  Around 11 PM last night Dow Futures were down nearly 900 points.  By 4:00 AM they were up more than 150 points but as I write this at 7:12 AM they are nearly 400.  All the blood in the water has attracted the really big sharks.  Whipped into a feeding frenzy, they will bite at anything, and we can expect this to last for a while.  Little fish like retail traders are just chum in the water and stand very little chance of escaping if we’re in the water.  Day’s, maybe even weeks of very challenging price action lie ahead.  Get out and stay out of the water if you can.

Trade Wisely,

Doug