Opening the week on a positive note during the early part of Tuesday’s session gave the impression we were off to the races. Sellers had a different idea erasing the morning gains and eventually lower prices. Futures are set to open much lower for Wednesday’s session and fears over a trade deal not getting done grow. We are not master negotiators nor expert in trade by any stretch of the imagination. However, at this point price action is very weak and appears we have some downside left in this market. At any moment, our situation may change in one direction or another. Right now, we must be prepared for anything and why we have stops in place along with hedging positions. If we are to continue the downside we will be protected and conversely if this market reverse course. It is really anyone’s best guess as to what happens next. Now, we are trading with a sense of caution and our risk management strategy in place.
Even if a deal is struck will price action revert? Perhaps, but there are no guarantees. If we were to fall even with a trade deal, there are more issues than most realize. There is no question these negotiations between economic superpowers are quite tricky. We do not make policy, nor the goal of this website is to provide any insight to how trade deals are put together. We know price action and how to manage risk. Leave it to the market pundits who pretend to have a clue as to what to do. We are not going to pretend we have some special knowledge. No one does. Price is the ultimate indicator. We follow it.
The bond market has been signaling some trouble ahead as traders have been piling into bonds. AGG is just an example as to money flowing into Bond ETFs. The 10-year treasury sits below 2.3%. Just a year ago the yield was nearly 3%. Even late 2019 we saw the 10-year go above 3%. Amazing what a few months can do to yields. Does this automatically mean the stock market is going to plunge? No, but what it does tell us is the economy has slowed down. To what extend is anyone’s best guess. At this point, given our backdrop with Tariffs and a lack of a trade deal anything is possible including a recession.
There are stocks out there holding up nicely despite what we see from the market. There is some hope we get a trade deal in place and stocks rip higher. Of course, we will be ready for whatever it throws at us. If you are willing to put in the work, it will be rewarded! Great luck to the rest of this holiday shortened week.
