Little to no fear.

As the weekend approaches with still unresolved trade war jitters, the VIX continues to indicate little to no fear of the swirling uncertainty.  New record highs in two indexes while the Dow looks to open below its 50-day average this morning adds additional complexity to the is already challenging the market.  With the market capable of taking a quick turn south as it did on Tuesday, I have wonder if the market is becoming weary of all the political noise and perhaps becoming somewhat complacent.

Consider your overall risk as we move toward the weekend and remember big gaps are possible in both directions.  I know I run the risk of missing out on a big rally if there happens to be a resolution to trade negotiations over the weekend but I will also be able to sleep better if I reduce my exposure to risk ahead of the weekend.  I’m not saying I’m right, but for now, that’s the plan I’m sticking to it.

On the Calendar

We kick off the Thursday Economic Calendar today with the weekly Jobless Claims at 8:30 AM Eastern.  Consensus expects claims to tick higher to 220,000 but still near historic lows as strong labor demand continues.  Also at 8:30 the Philly Fed Business Outlook Survey expects a decline to 28.0 vs. the 45-year high in new orders on the May report of 34.4.  We have a Fed Speaker & FHFA House Price index @ 9:00, Consumer Confort Index @ 9:45, Nat. Gas Report @ 10:00, 7-Bond Events at 11:00, Fed Balance Sheet & Money Supply @ 4:30 none of which are expected to move the market.

On the Earnings Calendar, we have 19 companies fessing up to their quarterly results today.  Among them are KR and DRI before the bell with RHT reporting after the close today.

Action Plan

The pop and drop in the DIA yesterday left index teetering on its 50-day moving average while the QQQ and IWM reached out for new record highs.  The SPY closed just slightly positive holding onto a sliver of the morning gap at the close of trading.  Unfortunately, the Futures turned south during the evening and currently suggest the Dow will gap down at the open below its 50-day average as trade war jitters continue to weigh on international companies.  While the Dow declines, it’s interesting to note that the VIX is fell back below a 13 handle yesterday as fear seems to remain in check.

As the weekend approaches and trade tensions continue, I will become more and more cautious about adding additional risk and will more inclined to reduce risk.  With big daily gaps possible and an uncertain weekend of tariff threats I know I will sleep better and enjoy my weekend more if my capital is safely resting in the account.  It’s true I could miss out on a surprise market rally but entering a little late is always easier than getting out when it’s too late.

Trade Wisely,

Doug