Markets hate Uncertainty

Markets hate uncertainty.  The swirling threat of tariffs has weighed heavily on the mind of the market for the last couple weeks.  Now that unknown is finally behind us the market can deal with the reality and get back to business.  Asian and European markets all responded higher, and the US Futures are pointing to bullish open as well recovering about half of yesterday’s losses in the SPY and the DIA.

Having lost a key level of support, the QQQ is showing a slight bounce back this morning, but it’s currently much more muted than that of the DIA and SPY.  We will have to watch it closely over the next few days to see if it can recover.  Even though futures are suggesting, bullishness be very careful not to get caught up and chase into the gap up open.  Give it time and wait for follow-through buyers to prove they support the opening prices.  Remember the lower risk entry occurs at or near price support.

On the Calendar

The Tuesday Economic begins at 8:55 AM Eastern with the Redbook.  At 10:00 AM Housing Market Index forecasters expect a 67 reading in September which is unchanged from August and the lowest reading in a year.  We have just one Bill Auction at 11:30 AM today.  Then the Treasury International Capital at 4:00 PM which is not forecast by consensus.

On the Earnings Calendar, we have 11 companies reporting with the most notable being AZO and GIS before the bell.

Action Plan

I must admit to being surprised to see the US futures pointing to a higher open this morning the 10% tariffs against 200 billion in Chinese products beginning next Monday.  Of course, China has already stated they will retaliate.  Putting on a brave face Asian markets closed higher across the board overnight, and European markets are also currently showing nothing but gains.

As of right now, the Dow is pointing to a gap up recovering more than half of yesterdays losses shrugging off tariff worries.   The SPY, QQQ, and IWM also indicate a higher open this morning, but the QQQ is in the most precarious position having closed sharply below a key price support.  Be careful not to rush into the gap waiting for follow-through buyers to prove their support of the gap.  Fast price action and quick reversals are certainly possible as the market reacts to the news.

Trade Wisley,

Doug