Why is the stock market refusing to rally here???

An hour before the open the market is off about .25%. It has recovered about 4 es points from the overnight lows.

The way I view the market right now is that it is oversold short term, seasonally we are about to shift into a tailwind  in a medium term. We have the elections coming up which are going to provide a great deal of uncertainty in the markets for the next two weeks. And then we have the geopolitical events around the globe I have talked about previously.

You have the shifting polls, campaign rhetoric, WikiLeaks revelations, veritas revelations, and whatever else can be thrown at the public. Most everyone has taken their sides (even institutions that historically have been neutral) and the sides are about as polarized as they can be.

So there is no reason now to expect the markets to blast off to the upside now?

That would be the logical take on the markets right now. But I read yesterday where there is a record number of participants out of the market now. From a contrarian standpoint, this is very bullish.

As an analogy let’s say that Cleveland was on the road at New England and the bookmakers opened the line at Cleveland -3.5. Which side would you take? Most likely you would be with 95% of the rest of the sports bettors with NE +3.5. And historically you would be scratching your head after the game wondering what happened?

Now this is an extreme example as this line would under today’s circumstances never happen. But if it did you best be on Cleveland or not betting the game. That’s the perverse logic it takes betting the NFL.

And this carries over into the markets. You have heard about the markets rising on a wall of worry. It happens all the time. So be careful how you extrapolate your conclusions based on current events. It’s a tricky road that few have the ability to maneuver on.

I am long a mean reversion trade and if we get more weakness today I plan on adding to it. Usually on  mean reversion trading its best to leg into your full position rather than placing it all at once. Rarely do you perfectly catch the bounce. More often than not you take some heat on the trade. Occasionally significant heat. So position sizing is imperative on mean reversion trades.

Today I plan on evaluating the markets the first 15 min or so and that will set the tone as to whether to consider breakout trades. Lately, I have been getting whipsawed a bit on these breakout trades. Which seeing what the market has done the last month or so is not unusual.

If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. 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

RickJ

RickJ’s Handicapping Picks

 

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