Deliberate Trading In A Volatile Climate
Bill Poulos | Jan 07, 2019 04:48PM ET
We ended the year on a fairly volatile note and then we began this new year with the same type of movements. While changing the year doesn’t change the market sentiment, it often times will bring a new perspective on what is actually going on. Currently, the market seems to be concerned that the economy may be getting ready to go through a global slowdown and this is causing much of the big moves that we are seeing. We are also dealing with the trade concerns between the U.S. and China. As these things play out, we are likely to see the markets return to more deliberate price action.
We saw another big move as the market shot up again as the Nonfarm payroll numbers were released. The numbers came out much better than expected, while the unemployment rate rose just a bit. We are continuing to look for trades that are trading in a deliberate fashion in order to enter the markets. If price action is non-deliberate, we need to be careful that we don’t get caught taking the trade, just to say we are trading. It would be much better to sit out and wait until our setups happen in a deliberately trading market.
Let’s take a look at how the markets performed this last week.
h3 DJ-30 Daily:In the Dow Jones 30 last week we saw a strong bounce off the lows and it looked like the markets wanted to recover from the bearish December. This week we had another holiday which can always cause the markets to become more volatile. All four of the trading days were very large movements overall. The reverse in the movement from Thursday to Friday has been very big. Now that the end of the year holidays are done, we will see if we can get a more sustained and deliberate move higher.
h3 S&P 500
On the chart of the S&P 500, you can see a very similar price pattern to the one of the DJ-30. The one exception is that today we see price taking out the highs of four days ago. This is generally a good sign if we are wanting the price to continue the move higher. With that being said, the overall trend in these pairs is still very bearish.
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Once again we see the NASDAQ looks like it is leading the way on this move higher. We will continue to see if this is the case this next week. With the trend being down we will want to look for opportunities to identify potential trade setups to take advantage of this downward move.
Overall the markets remain very volatile. Make sure you are using good risk management to take this into account. Continue to look for trade setups that are the most deliberate in their price movements.
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