Will this market ever seriously roll over? Of course, but when is the question.
An hour before the open and the indexes are gaping down with QQQ and IWM leading the way at -1/4%.
Of note, Oil down, Metals down, financials just below even, IBB just above even, and TLT of again.
So to me, that looks like a negative bias. On a scale of 1 to 10 I would give it a 6.5 if you need to have it quantified:)
These biases are as reliable as what the weatherman tells us on the evening news. Things can change on a dime.
What is more reliable is where the market is right now in the grand scheme of things. We are a bit oversold in the short run and in the intermediate term there is a negative bias.
Ideally, if you can find the right setup for a 1 to 3-day trade now would be the time to do it. But I would sharpen my exit strategy for several reasons. A sharp move to the upside would eliminate the oversold condition in the short term and the event risk is rather high right now. Combine that with seasonality and prudence is not a bad idea.
I had a few setups yesterday that I was watching but none of them gave me the opportunity to get in. The best of the bunch was TSLA but I passed on it mostly because the dip you are seeing in the stock is much too sharp to be a constructive buy the dip trade.
Typically when that happens you shift into mean reversion trading which has a completely different set of entry and exits. TSLA is quickly moving into that territory but TSLA historically has not been a very good mean reversion vehicle. So, best to look elsewhere at this point.
I usually have a basket of trades in 1 of 3 categories I watch every morning. The third is the breakout trade and is the trickiest to maneuver. Ideally, in breakout trading you want to have at least a chance for a trend day in the direction of the trade. That means to me $ADD to be above +800 if you’re looking at a long trade.
You can catch some monster breakouts if you happen to hit a trend day correctly. On the other hand, if $ADD is sitting at <+400 to >-400 the chances of getting whipsawed increases.
So Congress is back in session and what to expect? There is a lot of talk about postponing the August recess where the hard working congressman gets 1 month off. Not to be with their families but to scheme on whatever troublemaking endeavor they are finding themselves in at the moment.
In this instance, it is Trump. The president that is causing them all sorts of trouble. The biggest of which is that they are now under extreme pressure to do their job! How dare Trump embarrass them in that fashion. Unamerican:)
I will not rehash the various scheming that is going on in Congress against the White House. I have gone over it in detail in prior posts so this morning I will spare you with my analysis.
But there is an interesting line that was just put up that I think will be interesting in several respects.
The bet goes like this:
What is the odds that Christopher Wray gets confirmed by 7/31st? Now several weeks ago I made the comment that you should be looking for this line if it is put up in order to take the don’t if the odds seem off.
If I were asked to produce a line I would have put it in the neighborhood of 10 to 1 against. And even then I would be thinking that was too low.
So it came as a surprise to me that the line is 2/1 in favor of his confirmation by 7/31st.
Which means I am either a wizard at these things or my thinking is being influenced perhaps by a bias I might have regarding this. Or maybe it’s because I have no idea how to figure these things!
So this will be a good test of my prognostic ability on these political wagers. So far I have been pretty much spot on with the last being that there was value betting on the Republican in the Georgia special election.
Here not only do I see value but to me, they have the wrong favorite by a substantial number.
Not to bore you but my analysis is simply that using the nuclear option they can only afford to lost 2 Republican votes. The Democrats will be voting 100% against Wray.
Why would the Democrats want to change the status quo in the FBI now? They have an independent counsel and an acting head of the FBI who is under investigation himself for being complicit in helping the Democrats or at the very least has the appearance of a conflict.
In addition, they have Sessions who has completely dealt himself out as to be an effective AG at this point. So the Democrats arguably control the FBI in a year when the Republicans control the House, Senate, and the presidency. Regardless of your political bias, you have to hand it to the Democrats. That is quite an accomplishment. Machiavelli would be proud.
So that brings us to the Republicans in the Senate where last time I looked there were a number of never Trumpers who are dedicated to bringing Trump down. Why would they ever vote for an independent FBI head when they also have the best of all worlds right now. An honest, independent, hard-nosed FBI chief would have the potential to bring them all down.
So, I expect that while everyone is expecting with the nuclear option that Wray is a no brainer. I have a strong feeling that as we get closer to the vote, and after the Democrats have done every delaying tactic they can think of, there will be more than 2 Republican senators that will express serious problems with Wray.
I am going to view this wager as a test to see if my “logical” thinking might be astray on this subject.
Now as this relates to the markets is clear. Wray going down will further affirm that Trump’s agenda is at risk. Not only that it will affirm what everyone already knows, that the special counsel is there for one purpose, and that is to bring Trump down. As Gingrich put it when he saw the attorneys Mueller was hiring, “No doubt a hit job on Trump”
So, should be interesting to say the least.
Back to the markets for me as I really would like to find 1 or 2 trades this morning:)
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
RickJ’s Handicapping Picks