The day did not begin that badly for the stock market given the way Wednesday ended. A rebound was in place. Trump decided to tact on new tariffs on Chinese goods. What we saw from the market really wasn’t a big surprise. A China trade deal has been a thorn in the side of the stock market before. Regardless your position on tariffs it is clear the stock market does not approve. We will have to see if the FOMC will adjust their position on further rate hikes. If it is not obvious to you now is the time to be cautious as we are in a seasonally weak period for stocks. There is no need to be a hero whatsoever. At least the job report has the potential to shift focus. Our focus remains on price action only and right now we have piled up distribution days indicating rough waters ahead.
Friday’s job report will likely impact the market. It would have to be an outlier to really move the needle in one direction or another. The economy is likely headed for a rough patch given the yield curve indicating as such. Remember, the economy could head into a rough patch and the stock market could still head higher. Never fight the Fed and if they begin to lower interest rates there is no telling what the stock market might do. We are in a very dynamic environment and approach must remain fluid.
Lots of volume flooded the inverse ETFs yesterday. We have quite a few signals from yesterdays market. The easy ones to spot from a volume expansion standpoint are UVXY, TVIX, SQQQ, and SPXU. There are others out there too. While these inverse ETFs are attractive, we must be very cautious with them. They are not long-term vehicles to hold. These ETFs are trading vehicles and should be treated as such. Nothing more nothing less. Let’s not overcomplicate matters.
Heading into the weekend we are positioned well. We cannot predict the future, but we do know seasonality is against us here. More talk about tariffs and trade deals will certainly won’t help bulls. Will the FOMC change its stance? Time will tell, but for now we know the waters are getting choppy and we need to react accordingly. Enjoy the weekend!
