Threat of military conflict.

With 2^nd quarter earnings just around the corner, I get the impression the market wants to go up but is tentative due to the threat of military conflict with Syria.  Another consideration is the coming weekend.  Will traders hold with the uncertainty of military action or will they prefer to exit positions much like we saw last Friday?  As the CEO of your trading business, what will you do?  Making the decision even harder is the daily reversals in the overnight futures prices.  It’s a tough call.

There are a lot of charts shaping up and forming good patterns, but with the market flipping direction on a daily basis it’s difficult to plan trades when your edge and slip away in the overnight session.  If you do decide to trade it may be wise to take smaller than normal positions as a way to compensate for the uncertainty.  If the market moves in your direction and actually follow through for more than just one day one could always add to the position.   With the VIX stubbornly holding above a 20 handle expect volatility, whipsaws and fast price action to continue.

On the Calendar

We kick off Thursday with the weekly Jobless Claims at 8:30 AM Eastern which consensus expects to come in at 230,000 showing strong labor demand.  Also at 8:30 AM is the Import & Export Prices which expects imports to show a modest increase of 0.2% with export prices up 0.3%.  Nonmarket moving reports form Bloomberg Consumer Comfort Index, Natural Gas Report, 4-bond events, Fed Balance Sheet, Money Supply and a Fed speaker at 5:00 PM to finish up the calendar day.

On the Earnings Calendar, I see 24 companies are stepping up report results today.  Remember 2^nd quarter earnings officially kick off tomorrow with several big banks reporting.

Action Plan

Yesterday a gap down of about 200 points and this morning a gap up of more than 100 points is currently indicated in Dow Futures.  The VIX continues to rest above a 20 handle and above its day moving average as sabers rattle between the US and Russia.  With the uncertainty of conflict, oil prices continue to sharply rise which we will likely translate to higher prices at the pump very soon.

With the uncertainty, we should prepare for fast price action and quick reversals if military action begins.  Let’s hope cooler heads prevail, and an armed conflict never occurs.  These daily reversals are becoming tiresome, but perhaps we can get some relief with the kickoff of 2^nd quarter earnings and see a direction maintained beyond a single day.  However, with the weekend just around the corner, traders will have to decide if they want to hold with the threat of military conflict looming.  It could be a bumpy ride.

Trade Wisely,

Doug