Memo day is finally here and the stock market does not like it one bit.
All indexes are gaping down with the dow leading the way approaching -1%.
The only green I see on the board this morning is the U.S. dollar. Everything else is firmly in the red.
This to me means look out below. Where you would expect TLT to be firmly green it is unchanged.
Again this morning watch the 10-year note and breadth for clues.
Now on to more important intangible things:)
Our politicians have finally succeeded. They accomplished what no one has been able to. Their dysfunction has finally derailed the bull market. For how long only time will tell. But for now make no mistake about it, market participants are shaken by what they are seeing in D.C.
If I were an observer looking down at D.C. yesterday I would be amazed at the stupidity of the participants leading the U.S. government.
Stupidity is putting it kindly. Here you have elected officials, with the welfare of the country entrusted to them, acting like they are the U.S. and not the people.
The people are collateral damage as far as they are concerned. Acceptable losses in their political machinations.
Honesty, integrity, fair dealing, compromise are all dirty words anymore in D.C. And it is taking its toll.
If you think that the Memo is going to calm things down. Think again. This is just the tip of what is coming. The beginning of a fight that has been building up, perhaps for the last 9 years.
It has reached a fever pitch, but it’s not over. The fighting has reached a new level of intensity. Who will be left standing after this is all over? One can only speculate, as we all have incomplete information.
It’s like playing Holdem when all you can see is your two cards and the board. You have to be able to make solid inferences based on 1. Probability 2. Human nature and last but not least 3. logical thinking.
Easier said than done. And to help you out you have the media taking sides. The last bastion of the defender of democracy taking sides in a political battle! What will be next:)
They say that when all are losing their minds, you need to be able to keep yours. And if your a trader it even rings truer.
So what do we do as swing traders in an environment like this? We, of course, look for opportunity!
And there will be some as the markets being run by humans almost always overreacts. ALWAYS!
So, we are in an area this morning where it is time to look for some mean reversion trades. Now, with mean reversion, it is never a good idea to jump in with both feet.
A gradual building up of a mean reversion position is usually the best. As without a doubt, you will be underwater for a time. You rarely catch the bottom of a trade.
And keep in mind, every once in awhile, you take a big loss. That’s the nature of the beast. So its essential you position size and use a good filter for your trades. The 200 day MA is not a bad one to use. Most likely the best actually.
So, try to keep a clear mind, when the hysteria keeps rising. And you will come out fine. If you get caught up in it, step back, and go do something you enjoy.
Good Luck Trading today
If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. 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:)
Good Luck Today
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