Markets are retreating from the overnight highs toward the break even mark 45 min before the open.
Of note, Financials strong, Metals strong, Biotech strong, TLT and Oil weak.
Overall looks like a positive bias. The market, however, is overbought a bit but saying that there are a lot of positive setups that point to higher highs very soon in the short run.
But I doubt the market will go far on this upswing as Medium term overbought indicators are at extremes.
So that is the backdrop that we are looking at in the market this morning.
So much depends on how breath looks during the first 30 min of trading. For swing traders, I recommend monitoring $ADD and $ADQD on the 1 min charts. This will give you some idea where the market is heading. It is not perfect by a long shot but nothing is. Just a way to increase your odds a bit.
As an example, how many times have you been on the wrong side of a trend day? Sooner or later it should sink in that if you are looking at a trend day down if your going to put on mean reversion longs do it at the close. Or as to breakouts to the long side, forget it.
The opposite is true for shorts.
If you use this as a filter your profits and trading will improve a bit. It’s just one tool of many that can be used to give you the best chance at a very difficult endeavor.
I have been sitting this rally out for the most part as my view is increased event risk.
For example, the Senate is supposed to have their vote today on a new Health care bill. The odds this morning as to whether the Senate votes today or tomorrow is 3 to 1 in favor of a vote. As far as passing a bill by Friday the odds are 6 to 5 against.
The value is laying the 6 to 5 if you can get it.
Now if the Senate cannot pass a health care bill what do you think the chances are of tax cuts! Already Ryan is rumbling that no tax cuts or changes anytime soon. I have not seen any odds on this but I am sure they will be posted soon.
So if neither passes or the markets get a whiff that both are not going to go forward I doubt it will act positively.
That is one of the reasons I am not being aggressive here in the markets.
Another indication that all is not well in DC is the FBI appointment. When I recommended betting against Wray being confirmed by 7/31st you could get 4 to 1 betting the don’t. Now if you want to bet the don’t you have to lay 8 to 1. If I were forced to bet on this proposition now I would lay the 8 to 1.
That is despite he came out of committee with a unanimous recommendation of approval.
DC is broken right now with no signs of improving.
The best way to monitor DC is through the betting odds and your analysis based on what you read.
A caveat on the 2nd input. There is very little news that has a bipartisan approach. Most are severely slanted toward either the right or the left. You cannot base your analysis of DC on the slanted news.
So the trick is to find some reporting that tends to be accurate. And to tell you from experience it is like finding a needle in a haystack. There are very few real news reporters these days. Most are opinion reporters despite what they put themselves out as.
One site I found that seems to give a fairer discussion of the news is Circa.com. I am sure there are others but this is one I read daily.
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