As we enter Thanksgiving week, it looks like in the pre-market we are having some softness.
After two up days, that is not surprising. If history is a guide, however, this should be a positive week for the markets. In addition, this is a seasonal period that has been the strongest of the year.
The indexes are off around 1/4%. TLT is off the same. Metals, biotech, and oil off in the same area.
Even the U.S. Dollar is in the red, although only a hair.
What is more significant is we are off sharply from the overnight highs.
Whenever you get a sell off the pundits have to attribute it something. You have to remember there is a lot of program trading out there that works off news feeds.
It’s an interesting concept, as opposed to scanning for technical indicators. These scan for news, where programmers weigh the significance of various words and sentences and translate them into buy and sell signals.
These have been the market movers. And why you often times see a substantial overreaction to the news.
As an example, Kudlow says Trump is meeting with China on Trade, the programs hit and we get a nice rally, and then an hour later Trump might say time to put more tariffs on China, and we get a nose dive.
What is pretty consistent in all this is, If you fade the move off the news, and get your timing even remotely correct you have chances at making a nice swing out of it.
What the public does is exacerbate the move. So the programs initiate the selling. Then the public piles on at the end of the move.
So you look for moves with high volume. Not steady moves, but quick downswings with high volume after a news item.
Those are the ones to consider fading. But a caveat, I would not stick around too long in the trade. As you are only trading the bounce, not taking any real position.
Try it on paper, and you will be amazed how it works out.
It’s really a subset of the government shutdown trades that were so profitable a few years ago. Brinkmanship, the market went sharply lower, and a deal the last second. This played out so many time I lost count:)
But that is a subset, the one I am talking about now is a quicker trade. It plays itself out quickly.
As we enter Thanksgiving Week, the stock market is not as oversold as it was mid-week. I plan on exiting QCOM shortly after the Open. SSO I have not gotten my exit signal but we are close.
With a trade like Qcom I usually wait a bit to see how the market is going to set up for the day before exiting.
I will actively be looking for some swings this week. But, until the Nas/SP relative strength signals a buy, I am going to stay conservative. It is a long way from that triggering.
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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