Trade Policy Uncertainty

Facing another significant overnight gap down due to trade policy uncertainty its time to ask yourself a question.  Do you feel like your trading the market or fighting the market?  Daily triple-digit Dow gaps have significantly increased trading risks for most swing and position traders.  When good entry signals continue to reverse back and forth overnight depending on the threat, tweet or news report the swing trader has little to no edge.

Sure you can pridefully continue to fight but at what cost?  How much are your willing to risk trying to be right?  As the trade policy uncertainty continues big gaps, reversals and whipsaws will also likely continue.  If you feel like, you’re going into battle blindfolded without a weapon day after day; who’s fault is it when your capital disappears?  There will be better days ahead if you have the patience and discipline to wait for them.

On the Calendar

A busy week on the Economic Calendar gets going with the first market-moving report at 10:00 AM Eastern with New Home Sales.  New Home Sales according to consensus will continue its strong uptrend in sales with a slight increase to a 665,000 annualized rate.  We have Chicago Fed Activity Index @ 8:30 AM, the Dallas Fed Mfg. Survey and three bond events on the calendar today but they are unlikely to move the overall market.

We have only 12 companies reporting earnings today with CCL as one of the most noteworthy coming before the bell.

Action Plan

It was nice to see a little relief from the selling with the gap up open on Friday, but sadly the Bulls had no energy to follow-through after the gap.  With the threat of new trade war measures, the Futures are once again pointing to another triple point Dow gap down.  Currently, that gap could be as much as of 200 giving up all of Friday’s gains in one fell swoop.   The SPY and the QQQ look as if they could also give up important support levels at the open today.

The fact remains that while the US and China continue to battle trade policy publicly, the market will continue to react erratically.  Every trader has a decision to make.  Do I continue to put capital at risk knowing that significant overnight gaps are likely to continue or do I stand aside waiting for the uncertainty to pass?  Standing aside is a hard thing to do for most traders but if you find that losses are mounting trying to fight the market will only make the situation worse.  I started cutting back on my trading last week and will continue to do so until price action improves.

Trade Wisely,

Doug