Morning Market Prep Feb 22 2018

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Volatility is High

The bulls and bears are locked in a vicious battle for control.  Volatility is high, price moves are fast, and complete reversals happen in the blink of an eye.  I have suggested several times that the selloff would take weeks if not months to resolve and to guard yourself against being chopped up during such times.  I have continued to suggest caution and be patient.  I suggested if you do trade, then trade smaller than normal positions and be prepared for fast and whippy price action.  As a result, I have received some negative and very critical comments.

I am an unapologetic picky trader because I have learned the hard way that a market such as this can chop an account to pieces.  I’ve been there, done that and allowed the market to take back some or all of my hard earned profits.  I want to remind everyone once again that you don’t have to trade every day to be a successful trader.  Protect your capital.  Trust me on this that good trading will one day return.  The question is will you still have the capital and the confidence to take advantage of it when it does.

On the Calendar

Thursday’s Economic Calendar gets going at 8:30 AM with the Jobless Claims report.  Consensus expects claims to come in unchanged this week at 230,000.   At 11:00 AM is the EIA Petroleum Status report and has no forward-looking forecast but is trending toward rising supplies.  There are three Fed Speakers at 10 AM, 12:10 PM and 3:30 PM to discuss the market sensitive issue of rising interest rates.  We also have several reposts that are very unlikely to move the market such as Consumer Comfort, Leading Indicators, Kansas City Fed Mfg. Index, Fed Balance Sheet and Money Supply.

On the Earnings Calendar, we have more than 250 companies reporting today.

Acton Plan

The bulls seemed to be back in charge yesterday with the Dow rising more than 300 Points after the Fed Minutes were released.  However, the bears suddenly returned and in the market fell more than 450 points from its high.  When the Dow has a point travel of more than 750 points over the course of the day, swing traders struggle.  What seems like a good entry signal can quickly reverse and deliver a painful loss to even the best swing traders.

The SPY, DIA and the IWM are displaying the possibility of a Blue Ice Failure pattern.  Adding confusion is the Futures that continue to flip back and forth delivering daily gaps and often reversing the closing direction.  As I write this, the Dow Futures are pointing to small gap up, but that amounts to more than a 175 point reversal of yesterdays close.  Trading during times like this will rob you of not only capital but also take your confidence.  As a result, I will continue to repeat, that cash is a position and that you don’t have to trade every day to be successful.

Trade Wisely,

Doug

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