Stocks continue to bounce around in a tight range, which more or less, has been the trend this week. Choppy markets like this one… can be frustrating to trade…with all the whipsaw action it brings.
What’s my advice?
Stay patient. There are some trading days where there is little to no opportunities. It’s best to stay on the sidelines or trade smaller when markets get like this.
But believe me…patience pays off…just as these GDX calls did on Monday:
(My strategy works in all market conditions…that’s why I’m guaranteeing 50 triple-digit winners your first year of signing up…or get a lifetime of the service for free.)
As for right now, I’m tightening up the belt and being selective with until the market figures out what it wants to do from here.
That said, I’m looking at the SPY, as well as, the upcoming economic events (GDP, Jobless Claims) for further clues on where we go next.
Choppy Markets Are Dangerous
The market is all over the place right now… and it’s hard to pick a direction. That said, it’s times like these that chop traders up… especially those who are selling dips and buying rallies. Basically, if you take small losing trades time and time again as the market moves, it’s going to eat at your account.
When there’s no clear direction… I think it’s better to remain patient and wait for a clear signal to buy or sell… or make sure you’re trading small so you can ride the waves.
Here’s what I’m looking at in the SPDR S&P 500 ETF (SPY).
Basically, we’re looking for a close above $282, the resistance area on the hourly… or a close below $278, the support on the hourly. Right now, we’re at the upper end of the range, but I’m not getting excited until there’s a clear break above the resistance area.
You see, right now, traders are willing to sell around the $282 area… and they’re willing to buy at the 200 hourly moving average (the green line).
That said, the market is in no man’s land right now… and traders are being more selective with their buys and sells.
From a macro stance… I’m going to be watching a few indicators for the rest of the week.
Economic Indicators on Deck
We’re going to keep an eye on the U.S. Gross Domestic Product (GDP) and Jobless claims tomorrow at 8:30 AM. Last week, the Federal Reserve cut its 2019 GDP forecast to 2.1%, from 2.3%. That said, the Fed is actually reporting slower growth.
But why do we care about the GDP?
This indicator measures economic activity… and it gives us clues to how the market will perform. Generally, the market will rise when there’s economic growth. Now, bonds may be more sensitive to this indicator because they’re sensitive to inflation.
That said, I’ll be watching SPY, the iShares 20+ Year Treasury Bond ETF (TLT) around this data release tomorrow.
Additionally, we’ve also got Jobless Claims data tomorrow. Now, we care about this indicator because it gives us an idea of the strength of the job market.
If jobless rates come in lower than expected… it tells us the economy has been strong. On the other hand, if we see jobless claims tick up… that might signal a potential change in the market trend.
On Friday, Personal Income and Outlays data will be released at 8:30 AM… and this gives us an idea of the consumer sector in the economy. If there’s an increase in incomes, that means there would be an increase in spending. In turn, this would bolster stocks.
We’ve also got Consumer Sentiment data at 10:00 AM on Friday. Again, this indicator will give us an idea on consumer attitudes and spending… which should move stocks and bonds. The focus right now for stocks is whether there’s strong economic growth.
On the other hand, the focus will be on whether the economy is growing too fast, potentially leading to inflation, for the bond market.
What I’m Thinking
For now, I’m going to sit on my hands, and assess these indicators, as well as my money pattern.
However, that doesn’t mean I’m not trading.
I’m being very selective with my buys and sells… only trading off my money pattern.
For example, I bought Stitch Fix (SFIX) calls. I don’t necessarily like the company… but I can’t ignore the stock from a technical stand point.
You see, the stock had a huge pop after earnings a few weeks ago… but now the stock has fallen down to the 200-hourly simple moving average (SMA), which is the support level. That said, I bought SFIX for a bounce off the green line, as shown in the hourly chart below.
Moreover, I’m anticipating the blue line to cross above the red line… which should send the stock higher. I’m looking to sell half of my contracts if the options gain 50%… and I’ll be out of these calls if SFIX trades around $27.
Source: WeeklyMoneyMultiplier.com | Original Link