From the Trading Desk

Tight Action Continues as Stocks Ease Lower

The major market indexes finished lower yesterday as volume jumped higher. Transportation and Utilities continue to march higher. Real Estate stocks enjoyed a nice day as well despite the Fed all but guaranteeing a rate hike in December. Financials finished lower after Citigroup and JP Morgan released their most recent quarterly earnings. We still have a few more of the big banks to report earnings, but this start to earnings is not on the right foot. This market is still fascinating to us even though it lacks any volatility whatsoever. The VIX closed lower yesterday as many are simply not expecting ANY volatility over the next 30 days. Absolutely fascinating, but we focus on what matters: Price.

Earnings season is underway and it is a prudent move to know when your holdings are going to report. We have zero expectations for this earnings season, but we are not going to let our hard-earned capital be exposed on a guess. Therefore, we need to know when our stocks are set to report and act accordingly. Otherwise, we are unnecessarily exposed to risk potentially ruining our capital! We cannot have that at all. Protecting capital is our number one job and avoiding gambling is a great way to protect it. Do the due diligence and make sure you know your dates.

Sentiment is tinted bullish again. AAII survey is about 40% bulls. No real surprise there from this past week. The market continues to hit new all-time highs and there is still a level of bearishness. The same ole story continues. NAAIM Exposure index is still heavily weighted towards the equity markets. Not sure what it is going to take to trip up this market at this point. High valuations, politics, North Korea, and whatever else you want to throw at this market has not sent us in a tailspin. Remember Brexit and how it was going to obliterate this market? There are plenty of examples and we continue to chug along. It is amazing to see a market so resilient. We won’t fight this trend until we see some real evidence of a more sinister move lower. Besides, we have our exits in place to protect us from the downside.

We hope you had a great week of trading! Please, enjoy the weekend and make the most out of it.

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