Historically this week is a strong one for the markets and it has played out nicely. But the week is coming to an end and it appears to me that the bullish week will soon turn into a dramatic slide or perhaps a steeper pullback before we get to the sweet spot of seasonal investing beginning in November.
The market is down 1/5th of a % 45 min before the open. I am flat as I sold my 2 mean reversion trades just prior to the close yesterday at a profit.
Today it’s wait and see how the first 5 to 10 min go and then see if breakouts have a tailwind or headwind. Typically I do not attempt breakout trading into headwinds. Certainly, there are stocks that buck the market trend but the vast majority move with the market in one manner or another. That’s why it’s good to monitor the health of the markets as a backdrop to your trading.
One chart I look at to gauge positioning in the market is the Weekly SPX/QQQ chart. Back at the beginning of July, we got a buy signal as the QQQ outperformed the SPX on a weekly basis. This chart has not triggered an exit yet but we are getting very close to it triggering.
This chart has been pretty consistent in capturing much of the swings to the upside. It, of course, does not get the exact highs and lows but what method does.
On the Geopolitical front, Russia’s ships are on the way to the gulf. Expect increased tensions when they get there which have the potential to move the markets. So far I see nothing that builds into the markets the chance of market moving news there.
At home, debates are over and the news every day just shows how polarized this country is. Americans are taking sides, Business is taking sides and the News Media is taking sides. The battle lines are being drawn and this polarization is most likely to affect the U.S. for some time. Americans have very strong views on both sides.
In addition, the Wikileaks revelations most likely will not help the extreme polarization but will exacerbate it. You can see the potential effect this can have on the markets by just looking at the NFL. Viewership is down and revenues are taking a hit. This is no accident that it is occurring right now.
My guess is this has the potential to carry over into many of our corporations as Americans choose sides with their pocketbooks.Target is another example of where this occurred.
In the slowest recovery in our History, this has the potential to be devastating to our economy especially when you combine this with a Fed in hike mode.
There is always something behind the scenes to worry about if you are in the markets but right now they seem to be at extreme levels. We will see.
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’s Handicapping Picks
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