The Stock Market appears to be getting ready for its downward correction this morning. Although, it does show some signs of stabilizing an hour before the open.
TLT is off 1/5th%, U.S.Dollar is strong, Oil, Metals, and financials are weak.
To me, this is a negative premarket bias.
I have come very close to pulling the trigger on a mean reversion trade in SPY. But the late day bounces pull me out of the trade.
We are oversold, and I am watching to start trading mean reversion if we get another dip soon.
Nothing has changed. The economy is strong, tax cuts are still taking hold, employment is at record lows, N. Korea is being resolved, regulations continue to be cut back.
This is not the backdrop that bear markets are made of. However, a deeper correction would not be surprising as we head into November.
My opinion is that most of this nervousness is a result of the Fed taking an aggressive approach on rates. During Obama’s 8 years, not one rate hike. In addition, the Fed sent a record amount of liquidity into the bond markets.
But now under Trump, the Fed has reversed its course, draining liquidity while aggressively raising rates.
Trump is not a happy camper and one has to wonder how long Powell keeps his job. I expect some changes across the board after the midterms, regardless of how they come out.
One thing the Fed is not considering, in my opinion, is the effect of raising short-term rates is going to have on the U.S. debt. Since most are financed with short-term bonds, any rise in rates is going to have severe consequences.
This is going to be something to watch as not only are rates going to be a hit on the U.S. economy but foreign countries selling bonds is going to accelerate the effect.
To me, the fed is making a big mistake here. There is too much uncertainty out there. But let me say, my opinion and a few dollars will get you a cup of coffee:)
The Kavanaugh confirmation process is finally over. If you thought the Democrats would congratulate the new Supreme Court Justice and tell the country its time to heal you were delusional.
Despite what the polling is saying, the Democrats have announced that one of the first things they will do is impeach Kavanaugh if they take the House.
One thing I worry about is the 2 party system in the U.S. has kept the U.S. in check. Both parties have provided a check on each other.
But the Democrats for whatever reason seem to be creating an ending similar to the ending of “Thelma and Louise”
This “blue wave” seems to me to have the potential to be the death knell for the Democrat party. The betting odds have come down from 5 to 2 in favor of the Democrats taking the House to now 6 to 4.
In the Senate, the odds have increased from 2 to 1 to 9 to 2 that the Republicans will keep control.
My guess this trend continues into the midterms. Not because its good for the country but because the Democrats are on a self-destruct mission. People like Mark Penn had better speak up and talk some sense into Democrat leadership.
What all this means for the stock market is the next 30 days before the midterms are likely to be very volatile. That means it is time to cut back on your position size and get patient.
The best months of the year are around the corner. Most of the money made historically in the markets is the November through March time period.
I am going to take my own advice and cut back my position size until after the midterms. But I am still going to swing trade.
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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