As I said we have an event driven market right now. Everything was going fine until N.Korea launched a ballistic missile over Japan.
The market is now showing the effects of this with all indexes gapping down over 1/2 %.
Of note, Financials are getting pounded as is biotech. TLT and metals are strong. This is about 30 min before the open.
This is a strong negative bias this morning. Whether we have a continuation move to the downside or a gap fill is the question. Breadth during the first 15 min should give us a clue.
I am flat right now except for a mean reversion trade in AGN. So far I have not gotten an exit signal on the trade.
If the market continues to the downside I will be looking for mean reversion trades toward the close. Typically the markets over react to news and if you time it right you can get some nice trades in.
However, typically you do not pick the exact bottom. So you need to be prepared for more downside when you put on a mean reversion trade.
I have said this before that mean reversion trading is some of the most profitable setups I trade. However, it requires discipline in sizing your trades. And discipline in not panicking when the stock moves against you. This type of trading is not for beginning traders.
Pullbacks and breakouts are methods that beginning traders should stick to until they become comfortable with taking losses and position sizing.
N. Korea and Texas are the headlines right now. The markets will be watching closely to see what the White House does in response to N.Korea.
I expect strong rhetoric from the President, with negotiating behind the scenes between China, Russia, S. Korea and Japan. In addition, the U.S. has back channels to N. Korea that will be used.
But the market will respond to Trump’s comments initially so expect increased volatility.
And we have not even gotten to tax cuts, debt ceiling and the wall:)
Stay focused and you will be fine. Lose control and do not expect to be rewarded.
I will post any trades I make today. A lot will depend on Breadth. If there is a chance for a trend day down I will stand aside on long trades, at least until just prior to the close.
You can save a lot of money not being on the wrong side of trend days. So, you should learn how to spot them and then have a plan when they develop.
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