The stock market is plunging this morning off almost 2%. TLT is +.5% And Vix is + 18%. Most everything else is solidly in the red.
I would not play for gap fills today, but be looking at gap continuation plays to the downside. This day has the potential to turn very ugly.
The two big stories are China and Iran.
The China trade deal is looking grim right now, with the U.S. raising Tariffs and the Chinese vowing to retaliate. Neither side is back down from this fight.
The good news is that China cannot afford this fight. If the U.S. ever shifts to producing the goods it buys in China here, the Chinese economy is finished. Logically the Chinese will blink first.
But, the world has gone insane. So the variables to consider have become much more complex.
Power, Ideology, politics all come into play here. The Chinese people look at the long game, while America looks at the short game. They always have and that has been their big problem.
I could write pages and pages about this , but , suffice it to say, this equals substantial volatility ahead. Despite record earning, an astonishing growth rate , U.S markets are still news driven.
Now we come to Iran. There is a military buildup that people need to pay attention to in the Mideast. Not only by the U.S. but by Russia. I would not be surprised to things escalate from here.
Not only do you have a White House that will not back down from a threat, but you have a previous administration hampering the effectiveness of this administration’s policy. The U.S. has never seen anything like this to the scale that it has reached.
It is almost like there is a government within a government, trying to run the country on as a rogue administration. Kerry has admitted openly that he has told U.S. Allies that Trump will not be around much longer. No doubt that messaging has been done by others in the U.S. also.
The damage this has done to America’s interests abroad is monumental. As the previous administration’s foreign policy in my opinion was a dumpster fire.
Where this all leads is anyone’s guess. Fortunately for us, we only have to consider the affect on the markets. It would be a much bigger task to figure out where all this insanity is going to end on the big picture. I have my ideas, but it is not a topic for this site.
So, then how does one trade this mess. #1. reduce your risk by smaller positions. #2. accept the environment, do not fight it. It is a fight you cannot win #3. stick with what has been successful for you, the markets tend to be mean reverting #4 do not panic. Let panic of others create opportunity for you.
That is my short list:) If you cannot stay away from the Panic feeling quit trading. Trading is meant to be methodical, and organized.
I most likely will not be taking any trades this morning, except any stops I have in place. At the end of the day if the carnage is bad enough I will start a mean reversion trade in SPY. I do it in 1/4 increments.
I only have 1 mean reversion trade on at this point and it is in INTC. Its under water, but with mean reversion there are no stops. But, I have avoided putting on more than 1 mean reversion trade to this point, which is some consolation:)
As a part of my sports handicapping subscription I send out almost all of my trades via Viber. This has been a nice value-added feature of the handicapping service. At $49.00 a month for all sports plays I handicap, you get most of my stock trades.
If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. It is free. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.
It’s my private twitter feed for the stock market and its free. Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:) In addition, I share all my short term swing trades to subscribers.
Good Luck Today
RickJ’s Handicapping Picks