Trading or gambling?

With all the political uncertainty and facing a mid-week holiday are we trading or gambling.  We have had almost two weeks of significant daily gaps and whipsaws, and that trend looks continue this morning with about a 150 point gap down in the Dow.  Unless you believe one of the countries involved in this tariff standoff throws up there hands and says, ‘you win, we give up.”, then it would seem that the erratic price action will continue to elevate risk.

How much of your capital are you willing to risk when there is little to edge?  I know standing aside is a very hard thing to do but if your capital continues to disappear in this environment.  However, if you continue doing the same thing over and over why should you expect a different result?  So I ask again, are we trading or gambling?

On the Calendar

We start this Holiday week with three potential market-moving reports on the Economic Calendar.  At 9:45 AM Eastern the PMI Manufacturing Index seems may be losing a bit of momentum with a June reading of 54.6 with consensus pointing to tariff effects.  The ISM Mfg. Index at 10:00 AM expects a slight decline to 58.3 in June vs. the 58.7 reading in May according to forecasters.  Also at 10:00 AM consensus expects an increase of 1.8 in April with the overall number to be GDP positive up 0.6 percent in May.  After that, we have three bond auctions to finish up the calendar day.

Action Plan

With new tariffs kicking in and the new threat of 300 billion more out of Europe my glad I exercised caution an avoided adding new risk ahead of the weekend.  The uncertainty created by daily morning gaps has created a dangerous environment for swing and position traders.  Add volatility to an already short holiday week where volumes will likely be light the risks for swing traders only grows.  The fact is the current market enjoinment is more akin to gambling that it is to trading.

Currently, the Dow Futures indicate a gap down of nearly 150 points wiping out all of the Friday gains.  It would seem a retest of the 6/28 lows is possible, maybe even lower if that doesn’t hold as support.  With uncertainty so high I I’m already light in my account, and I think it highly unlikely that will change over the course of this entire week.  Considering the holiday and the large daily gaps, I have no edge.  If I wanted to gamble, I would go to Vegas where they would at least bring me free drinks for giving up my edge.

Trade Wisely,

Doug