Will Korean tensions keep the Bulls away?

With such strong sell off it would not be unreasonable to think a bounce is in the cards for today.  I would agree however the Korean tensions could make it difficult for the Bulls to buy this dip.  I can tell you that see no good reason to add risk going into this weekend and I suspect many will have the same inclination.  That’s not saying we can’t or won’t experience a relief rally.  I’m only suggesting the possibility exists that it may be a lackluster bounce or that it may not occur all.  Trying to predict a bottom is just a futile and dangerous as it is trying to predict the top.  Wait for proof in price and then react unemotionally with a well thought out plan.

On the Calendar

The Consumer Price Index tops the Economic Calendar today coming out before the market opens at 8:30 AM eastern time.  The consensus is only expecting a gain of only 0.2% with the yearly rate slipping to 1.8 from 1.9 on the last reading.  Declines in cell phone services and fundamental prices including housing are the culprits pointed to as the reason growth in this number remains weak.  At 9:40 AM and 11:30 AM we have Fed Speakers rounding out the day.

The Earnings Calendar will not begin to lighten up dramatic with just under 70 companies expected to report their results today.  At the close yesterday, NVDA topped estimates, but the stock sold off sharply and is indicating a 7% gap down this morning.  That will not be helpful to an already weakened QQQs as we head into the weekend.

Action Plan

The follow-through sell-off yesterday created some significant psychological damage in the indexes.  The SPY, QQQ’s and IWM have also suffered significant technical damage cutting through the 50-day moving average.  Even more damaging is that the SPY broke the uptrend that began in early 2016.  The IWM being the weakest of the indexes fell all the way to the 200-day moving average and is currently indicating it will gap below it at the open today.

Adding insult to injury, the futures are again suggesting a small gap down at the open.  Normally after a sharp selloff such as this, it is reasonable to expect a bounce in price.  However, as we head into the weekend the tensions growing in North Korea, traders may prefer to avoid the risk.  I for one will not be looking for new positions today as I view the weekend risk simply too high for my taste.  Having already trimmed my portfolio ahead of this sell off I will sleep well this weekend.  The market will be open Monday, and there will be plenty of opportunities made available.  Of course, I will be closely monitoring the positions I continue to hold and plan to carry through the weekend.

Trade Wisely,

Doug