After Friday’s big sell-off traders returned on Monday jittery and worried about economic factors. Headlines focused on the Mueller report while we are focused on price action. Small cap stocks are our focus as they have been struggling and now the Russell 2000 sits below its 50-day moving average. We will need to see the index stabilize and avoid further selling. At the moment, small caps do not look too good. Bonds continue to rally pushing yields lower as the market is really beginning to indicate an economic slowdown is ahead. Regardless of what we think might happen we still need to adhere to our trading process. We cannot trade the market we want, but the one in front of us. This market is on shaky ground and it is paramount our risk management is on point including our exit signals.
The bond market is pricing in a rate cut later this year at the September FOMC meeting. An economic slowdown should not come as a surprise. We have not had a recession in 10 years. This is the result of the massive liquidity injection the FOMC did after the great recession. We are not going to argue the merits of central planning or banking, but we are going to focus on how price reacts. In the end, this is all we care about. Big Wave Trading does not exist to argue whether or not we should print money or raise/cut rates. Let’s leave all that noise to the market pundits who make a living trying to sell you the noise on CNBC and FOX Business. It will not help your trading one bit. Focus on strength and a sound risk management process along with Big Wave Trading. Your portfolio will thank you!
We wish you well with your trading this week!
