Overnight Bounce

The wild ride continues with futures indicating a huge overnight bounce off of yesterday closing low.  Also, huge in the hearts and minds of trader will be the Fear-Of-Missing-Out and the desire to revenge trade to get their money back.  Unfortunately, with the Dow indicating a bounce well over 300 points at the open you will have to have an iron constitution willing to chase into a market likely to whip violently.

The market will recover but it will likely weeks if not months to repair the technical damage this selloff created.  Just study the February selloff as an example.  While it’s true, there are bargain prices; you will have to earn them only if you have the willingness to hold the position though substantial whip.  Fourth-quarter earnings will also add a complication to this process so carefully plan your risk as we head into the weekend.

On the Calendar

Import/Export Prices top the Economic Calendar this Friday at 8:30 AM Eastern.  Consensus expects import prices by 0.2 percent while export prices rise 0.3 percent in September.  Consumer Sentiment is expected to ease slightly in September to 99.5 according to consensus estimates.  We have three Fed speakers today with Evans @ 9:30 AM, Bostic @ 12:30 AM, and Quartes @ 10:30 PM.  Also, we have Baker-Hughes Rig Count at 1:00 PM, but it’s unlikely to move the market.

Fourth Quarter earnings officially get started today. Among the eleven companies reporting today the most notable are C, JPM, PMC, FRC, and WFC which all report before the bell.

Action Plan

After another day of heavy selling, the Futures are pointing to a substantial gap up this morning following rallies in both Asian and European markets.  Part of the inspiration is coming from the new that the US and China are once again setting down at the trade negotiations table.  Let’s hope we see some progress this time!  Keep in mind the preliminary futures could move around significantly this morning as several of the big banks report before the bell.

With such a huge gap at the open, it may, unfortunately, be very difficult to profit unless you were a buyer at the close yesterday.  Remember volatility is likely to remain very high so expect some very whippy price action.  Entering this morning will not be for the faint of heart.  Plan that you will likely have to be willing to sit through some rough price action and deep whipsaws.  However, if you have the stomach for an intense roller-coaster ride, there may be some opportunities to pick up great stock at bargain prices as we bounce from such and extreme short-term oversold condition.  Carefully plan how much risk you are willing to hold through the weekend.

Trade Wisely,

Doug