As I write this, the Dow is expected to open more than 300 points lower and continues to face the uncertainty of the government shutdown.   Asian markets sold off sharply during the night with December manufacturing numbers came in worse than expected.  European markets are bearish across the board as well this morning, and the US Futures are pointing to a nasty overnight reversal gap down. 

Today the President is meeting with Congressional leadership so we will have to say on our toes because the market is likely to react quickly to any news, positive or negative that results from the negotiation.  The volatile price action continues to favor the quick day traders as the risk of holding positions overnight in this emotional market remains very high.  Price action will likely be very sensitive to any political news so remain focused, flexible and ready for intraday reversals.

On the Calendar

On today’s Earnings Calendar we have only seven companies reporting, and unless you happen to hold them, they are not particularly notable. 

Action Plan

The bullish gap on Monday looks fully reverse as the market sentiment continues to flip-flop from moment to moment.  The current price action continues to favor quick day trading because the risk of holding over trades over a single night is unsuitable for most swing traders.  The President has called a meeting with Congressional leadership to discuss ending the government shutdown.  The news spin out of this meeting could move the market sharply so we will have to stay flexible and focused on price action.

Currently, the Dow futures are pointing to a 350 point gap down which of course means we have to watch carefully for the possibility of a reversal whipsaw much like we experienced last Thursday.  However, there is no reversal, and the sellers remain in control after the open it would be wise to remember that support could be hundreds of points lower.  That’s one of the challenges of whip like this because the price action didn’t take the time to build support levels.  Volatility is likely to be very high today and price action very sensitive to political news.  Stay flexible, focused on price action, avoid trying to predict and watch out for possible whipsaws.

Trade Wisely,

Doug