Yesterday evenings Trade War news triggered selling that continued into today's session. I think we are all tired of these after hour tweets and headlines. Just like every other trade war tweet and headlines, this one too will be just another buying opportunity. Short term the question is when will prices reverse higher?
Last week the market shrugged off the first salvo of Tariffs and rallied after a superb jobs report. The upside action continued this week with that 2800 level right there for the taking. And then after the close yesterday the Trade War escalated and that 2800 test, that looked all so certain, is going to have to wait for another day.
But when?
Is this another rejection that will lead to more downside?
Or are we setting up for that test and break higher this week?
Momentum is still strong for $DIA $SPY $QQQ $IWM. with the $DIA showing the most potential for upside over the short term.
Financials have a great set-up into earnings season, with the recent pull back, starting to abate.
The VIX, despite the sharp move lower today and all the trade war drama ended up a very modest 5%.
The longer term set-up for the VIX is a return to the dull and drab index of 2017. A 10-12 VIX or less. After the spike at the start of 2018, the VIX is still working its way back to where it was and the same could be said for the $VXX. Which was also up a very modest 3% today.
I'm in some longer dated calls and that will likely remain my plan as this Trade War Drama plays out. If its anything like the last few blowups, stock futures will be up .5% tomorrow morning.
If not, I'll be closely watching the first hour of trade. For the bulls I want to see a market pulling back during this time. For a bear lets see a upside and highs made an hour in. That would be a set up for a sell off like we saw today. In either case we can probably figure out what the bias will be for the day.
What do I think this market is going to do short term? I think that 2800 level is coming and its going to break.
And maybe, perhaps, this time... we won't get that afterhours tweet/headline to take it down.