Late last night, news came out that President Trump tested positive for COVID. He began taking quarantine measures immediately, and soon after, futures tumbled by over 1% in a matter of minutes. Today's choppiness tells us something about what direction the market will head in the short term.
The best way to prepare for what is about to happen is by managing risk. Although there is a lot of uncertainty, it does not mean that we should be taking big bets on either direction. If you plan on preserving your capital, the best way to trade is through small lots relative to your account. There's no way to predict what can happen, and patience is required to stick with whatever trade is going on.
Here's what the market choppiness is telling us:
Taking a look on the hourly chart with nothing drawn, you can see that not much has happened in the passed few days direction-wise. If you longed or shorted on the 29th of last month, you'd be near breakeven had you stayed in. This is purely a traders' market in the short term which means the market cannot decide on a direction.
When price looks uncertain, that's usually an indicator that a big move is on the horizon. With today's additional choppiness, we have to consider a couple of factors: 1.) Trump's positive test will mean a delay in presidential debates, causing further uncertainty on who is going to pull away in the election. 2.) Unemployment drops to 7% which is the lowest we've seen since March. This is a good sign of economic recovery. 3.) Investors and analysts have been saying for a while that the economy and the market are at a disconnect, so economic news doesn't really matter. 4.) Biden tests negative. 5.) Risk-off sentiment increases.
There's too much going on right now to gauge what is good or bad news, and what news outweighs other news. The overall theory I have is that the market will have to decide which direction it wants to move. And I personally think that starting today or next week, the market will be headed lower with Trump's health in mind. If he continues to have no symptoms, things will likely float upward. But in the meantime, it's too soon to know. Next week will definitely be a decision point.
In our community, we're encouraging traders to keep lot sizes small. We also mention that it is time to be patient with each trade.
Right now, it looks like a potential head and shoulders pattern in the making on the 4H chart as price fluctuates up and down. At the time of writing this, we're an hour to close, and price is moving heavy in either direction. This is why small lots are important. Whether you are long, short or in between, remember to keep an eye out for price movements and behaviors in the week to come as well as some heavy volatility. Hope everyone is trading safely!
Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.
Today at 2:00 pm EST, the Fed will announce their latest interest rate decision. Estimates suggest a smaller hike of 25 basis points this time around. Here are some things to consider before the FOMC decision later today: The Fed has struggled to tighten their grip on inflation without causing too much disturbance in the […]
With the holiday season lingering on and a new year on the cusp of arrival, traders may glance at the calendar and notice there is not much economic news to anticipate on Friday to cap off a light week. In situations like these where there can be lulls in bullish and bearish momentum due to […]
As the fiscal year comes to a close, consumers will likely finish shopping for the holidays, and traders and investors will get some respite thanks to a long weekend due to bank holidays around the world. While concerns about further stock market selloffs may be lingering in the minds of some, a promising set of […]
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here