With all the news surrounding the US-China trade talks, we have seen a fairly volatile trading week. We are going to continue to be cautious as any news from President Trump or the Chinese government seems to cause a significant reaction. This is one reason why we typically will avoid trading when news is coming out. There are 2 types of news that we have to be aware can come out. First, the scheduled news. This is the type of news that will be on the calendar and one that we can prepare for. An example of this would be earnings releases, dividends and the economic reports that come out. The second type of news is the unexpected type. This is something that happens that is off the schedule and can happen suddenly and have a big reaction. An example of this would be the threat of war, an invasion of a country or even an unexpected tweet from the President.
If you are trading in the markets, you will always have the potential for new impacting your trades. This can be offset by the use of good risk management and proper position sizing. Make sure you are prepared for the unexpected as well as the expected news.
Because of the news surrounding the trade talks, the markets have been a bit more volatile than usual. Take some time to review the charts below to see what is going on with the markets.
Let’s take a look at how the markets performed this last week.
The chart above is the daily chart of the DJ-30. This is the first week since January that we have seen the price trade below the 50-period simple moving average. When we see this happen, we can begin to think the bears are gaining some strength. This could be the beginning of the longer term pull back we have been discussing could happen. This upcoming week will be an important week to know if there will be follow through on the down move. If it continues to move down, we will then look to see if it takes out the prior swing lows and begin a new down trend. We will watch to see what happens.
On the daily chart of the SP-500 we can see that it is still showing a bullish pattern as the price has yet to drop below the 50-period simple moving average. This area will often act as a support area, causing the price to move higher. A break below this would suggest a bearish push lower and a potential for a new downward trend. Like the DJ-30, we will wait to see if prices can take out the last swing lows to move lower.
The Nasdaq is almost the identical pattern that we are seeing on the SP-500. We will see if the news this upcoming week will support the downward movement or if we get some bullish price action coming back into the market. The key is to trade what we see happening and not try to guess what the direction will be.
Overall, we have continued to be in a bullish market, although with some bearish momentum this week, and have seen the news cause some additional volatility. We are also coming to the end of the earnings season so we will continue to see how this moves the market next week. As always, make sure you are using good risk and money management in all your trades, so you are prepared to exit your trades at the appropriate places.
About Bill Poulos
Bill Poulos was captivated by the stock market at an early age. He started trading stocks in the early seventies while establishing himself as an executive for General Motors. Bill learned many valuable lessons from his mistakes trading in the markets. Poulos retired from GM in 2001 when he and his son, Gregory, founded Profits Run, Inc. The company provides materials to assist investors in making smart trades while minimizing risks. Bill is the author of books on economics and trends in the markets. Poulos is a philanthropist and is passionate about inspiring American youth to become entrepreneurs. He married his high school sweetheart, Karen, in 1969. They reside in Wixom, Michigan.