Stop Digging

I have the privilege of working with a lot of traders from all over the world.  A common theme I’ve heard over the last couple months is that many are seeing their accounts chopped to pieces.  I hear things like; Everything that was working last year is now delivering a lot of losses.  What they have failed to recognize is that the market has changed and they have not adapted to the change.  There is an old saying, “if you find yourself in a hole, Stop Digging.”  The market has changed and has become very challenging even for very experienced traders.

If you find that the market is handing you one loss after another, then it’s time to stop digging and reevaluate.  If you have no “edge,” then your likely only providing liquidity to those that have adapted.  Stop, reevaluate, wait for your edge to return or adapt your trading to the current market conditions.  The only alternative is to watch your capital disappear along with your dreams of financial independence.

On the Calendar

The Thursday Economic Calendar is a full-one, but there are only two potential market-moving reports today.  First is the 8:30 AM Jobless Claims that consensus expects to decline 1000 to 225,000 as labor demand continues to be steady and strong.  Secondly, we have the PMI Composite at 9:45 AM which consensus suggests will remain strong at 55.2 with PM Manufacturing at 55.7 and PMI services at 55.7.  Reports today that are not expected to move the market, FHFA Housing Price Index, Consumer Comfort index, Leading Indicators, Natural Gas report, Kansas City Manufacturing Index, Fed Balance Sheet, Money Supply, and 8-bond related events.

The Earnings Calendar shows 84 companies are expected to report earnings today.

Action Plan

When I ran out early yesterday for an eye doctor appointment, the price action was still whippy but leaning slightly toward some hopeful bullishness.  Sadly the bulls were unable to hold on to that bullish sentiment with only the IWM managing to close the day positive.  It would seem jitters over additional tariffs, and the potential of a trade war with China is to blame.  Yesterday I mentioned that the indexes were sitting at the edge of a very big cliff and it wouldn’t take much to push them over the edge.  With the Dow futures pointing to more than a 150 point gap lower this morning, it would appear tariff fears could give us that push.

Remember big morning gaps can often create whipsaws and very fast price action.  Be careful not to chase the gap.  The next visible price support lower on the Dow is still several hundred points away.  If the bulls don’t fight back hard, we could experience another significant selloff today.  Protect your capital.

Trade Wisely,

Doug