A mixed day on the street as the US Government remains in shut down mode. It appears the street can’t figure out when the Government will actually default and it has caused some confusion amongst traders. The good news on the day was the market was able to close above the mid-point of the day. On the other hand, the market wasn’t able to push higher at the end of the day as sellers took control the last half hour. Yesterday’s damage was vast and while we were able to avoid going out at the lows we didn’t get the reversal with power. Caution should be exercised here and given the damage we saw yesterday price wise it may take some time to repair.
Normally, on a FOMC Meeting Minutes day we’d have a bit more reaction from the market given comments made by FOMC members. The market did surge prior to the minutes, but stalled after they were released. Even the anticipated announcement of Janet Yellen failed to push stocks higher into the close. Yellen is expected to push tapering out further and longer then originally expected. So much for retirees gaining income from their bond holdings and not too mention the continued pressure on Pension Funds. This is noise to our trading process, but from a citizen point of view we continue to be on a very slippery policy slope.
Yesterday’s damage was quite extensive and hit quite a few market leaders. Even a few experienced traders were caught having too large of a position in thin names. Position sizing is a critical piece of money management and it is one you cannot ignore. One may have a greater tolerance for risk, but ignoring the liquidity aspect to position sizing is a critical mistake. Do not make this mistake. It takes quite a bit of capital to get into trouble, but always know if you need to get out there is enough liquidity to do so.
Tomorrow is a new day and perhaps the meeting at the White House between the President and Republicans will produce a solution to the current stalemate. One can be optimistic! Will it mean a higher stock market? Time will tell, but it appears we need to get to the eleventh hour before a deal is struck.
