Was the market plunge a one time occurrence or a signal that all is not well?

Markets are mixed this morning an hour or so before the open. SPY and QQQ are positive while DIA and IWM negative.

Of note, Financials Metals, Oil are positive. TLT is slightly positive also.

Overall looks slightly negative to me overall.

The markets took a plunge yesterday as a result of the rumor the Cohen was leaving the administration and then the attack in Barcelona.

That is what happens in news driven markets. And without a doubt that is the environment, we are in now. My feeling is that it will stay that way for some time now.

There are a number of market moving news events that could rock the markets at any time. We have the special counsel, terrorist attacks, civil unrest in the U.S., Congress and the White House in full-blown attack mode resulting in the pro growth agenda getting stalled, debt ceiling coming up to name a few.

There are more. But I will spare you the details. But tearing down national monuments without legal repercussions is ominous for the U.S. I am certain the markets are watching this closely.

The geopolitical climate seems to have settled down a bit with China seeming to get on board to keep N Korea in line and N. Korea at least on the surface seeming to respond backing off its sending rockets toward Guam.

Looking over at the political odds landscape, Moore has stayed steady overnight as a 6 to 4 favorite over Strange. I like Moore in this matchup.

Regarding the odds, they can often be predictive of the stability of the Whtie House. For instance, McMaster, Mattis, Sessions, Kelly, and Tillerson are all around 9 to 1 favorites to be in their positions on Sept 30th. Typically you will see big movements in these lines if something is in the works.

A line I just noticed is regarding individual tax cuts by year end. The odds are 2 to 1 against. I think there is value laying the 2 to 1. The same is true for corporate tax cuts. I view the line to be around 5 to 1. The divide between the white house and congress keeps getting bigger.

I received an email the other day asking why the political odds were in the stock market section rather than the sports betting section.

I could of put it in either place, however, since the political climate directly affects the stock market it seemed more appropriate here.

Today, I will be looking for mean reversion trades. The market is oversold right now. A down day today and I will be starting mean reversion trades again. I still have one from the last oversold condition and it is taking a beating. But, selling at this point is a mistake for a mean reversion system. You stick with the plan and you save EV rather than plunging out when fear is in the air.

A good weather vane is when you start feeling panic in a position and have a strong desire to just cut your losses. That is usually a reasonable signal that things are about to turn.

Mean reversion trading is not for everyone. I have found it the most reliable short term trading method but you need to have filters in place. The best is the 200 day MA. But there are others. Even then you’re going to get an oversized loss. No way to avoid it.

So if that is against your grain just eliminate mean reversion trading from your arsenal. There are many other methods to pick from.

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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