Small cap stocks led the market lower on Tuesday after the long holiday weekend. The same fears exist over the ongoing trade war between the United States and China. Tuesday’s action saw the 10-year treasury note yield trade above the 2-year removing the inversion. NASDAQ volume was higher on the session while NYSE fell. A distribution day for the NASDAQ is not exactly what the bulls wanted to see from the NASDAQ. Bulls will want the market to avoid any further distribution over the next few days. All we can do right now is to ensure our risk management strategy in place. While we may have an opinion of where the market is heading next, we do not know the future. Stay nimble with an open mind as this market moves through murky waters.
The wedge pattern we are seeing in the QQQ and SPY indicates we are headed lower. There are no guarantees in this market, and we must let price guide us. In order to negate the rising wedge, we will need to see a follow-through type day pushing through the 50-day moving average. Given where we are in seasonality it would be unlikely to see the market push higher. Anything is possible, but odds are favoring this market to move lower. IWM is already weak and it too continues to be the weak link. Investors have cast aside small caps for the better part of this decade favoring the likes of QQQ. SPY has even outperformed IWM for quite some time. Perhaps a trade deal will help.
Bitcoin is sitting nicely in a bullish pattern. The Crypto Currency continues to be the go-to in the space. LTCUSD and ETHUSD have fallen to the wayside for now. GLD and SLV continue to see a flood of investors and traders alike as both ETFs are hitting new highs. SLV has been on a tear. Even platinum is joining the party as tracked by PPLT. Flight to safety is nothing new. XLU and XLRE are pushing higher as low yields are pushing investors to higher yielding asset classes. Not exactly exciting, but it is where money is flowing currently.
This market will always maximize the amount of people to confuse. All we can do is control what we can control and leave alone what we cannot. Risk management is the number one thing you can do when you are in the game to reduce your downside risk. Of course, you could sit on the sidelines forever, but where will that get you? Get in the game with Big Wave Trading and dominate this market.
