Selling was unrelenting for much of the day on Monday as investors and traders alike fled for the hills. Fears continue over the Trade Dispute between China and the US continues. Regardless of your opinion the stock market does not take kind to this situation and expressed its displeasure by selling off 3% in heavy turnover. Bonds continued their march higher as investors rushed to seek safety. Bitcoin bounced off its 50-day moving average too. The NASDAQ 100 led the market lower finishing down 3.60%. A little surprising small cap stocks didn’t, but still small caps were lower by 3.02%. Where the market go from here is anyone’s best guess. Our focus will remain on our risk management process and managing our positions accordingly.
Futures are indicating a higher open for Tuesday. Not a real surprise, but given futures were down big last night the turnaround is at least a positive. The Chinese did move to stabilize its currency over night helping turn the tide. US declared Chinese as a currency manipulator which helped further the decline after the close on Monday. As this saga continues expect volatility to stay elevated. The VIX closed yesterday at 24.59 an elevated level suggesting option buyers expect volatility to continue. Wherever this market wants to take us we’ll follow. It is our job to manage our open risk wisely. There is no need to be a hero. Stay patient and diligent.
We will say the inverse ETFs positions we put on last week helped tremendously over the past few trading sessions. While they are strictly a short-term trading vehicle, they do provide help to your portfolio as the market slides. The one caveat is you must be nimble with these trading vehicles otherwise you may see your hard-earned capital flushed down the toilet. We have seen many traders come and go simply because they could not handle these instruments. Instruments like UVXY, TVIX, SKF, TZA, SQQQ, SPXU, and more. If handled properly they are a nice way to take advantage of a market like we have right now.
A simple guess where this market is going is tough. We may see the market rally for a bit only to reverse lower. Was Monday a bottom? Sure, but given the lack of panic and level of complacency coupled with weak seasonality it is doubtful we have seen the lows. Keep an eye on stocks holding up during a correction as those stocks tend to lead us out when the market does turn. Keep grinding and we will keep winning in the stock market.
