What a wild ride stocks had on Wednesday. Overnight futures were hit hard on the news China imposed their own tariffs on US goods. The tariff war between the US and China has sent some shockwaves through the markets, but in all likelihood there will be a deal struck. The two sides have too much at stake to escalate much further. This does not mean the market is automatically going to go higher. We’ll continue to navigate these volatile markets. We will maintain a lean and mean posture while we let the market sort out what it wants to do next. Remaining patient will pay off in the long run here. We are at least holding nicely here, but we need to see this market follow-through. Big volume and big price gains would go a long way in confirming a new market rally.
Yesterday was a positive sign for the market and while volume was not higher day-over-day, but price gains off the morning lows was quite impressive. It was not perfect, but it was nice to see the market avoid plunging further into the abyss. Bulls need this market to avoid heavy losses on big volume along with a follow-through day. If we are to get back to all-time highs we need confirmation. Most now are not expecting this market to return to all-time highs any time soon. Let’s also not forget we have earnings season right around the corner. We want to stress to stay disciplined and remain vigilant with your risk management process. Anything else will lead you down a path of heartache and a diminished trading account.
Sentiment remained tilted to the bearish camp, but bulls still remains above 30% in the AAII survey. Bears ended the week at 37% and Bulls ended the week at 32%. We are not a surprise most are out of this market and have been stunned by the market volatility. The VIX still remains hovering around the 20 level as investors are still expecting volatility over the next month. This is not a bad situation to have some fear about the future. Big rallies tend to kick off after big volatility periods. Now, we just need to see what the market wants to do here. Do we see a confirmation of the rally and avoid any distribution? Time will tell! We hope you have had a great week so far and looking forward to closing out the week with solid gains!
