SPDR S&P 500 (SPY)

[ITMS]

Trading An EKG Market

Since the October sell off started these markets have seen extreme volatility. This is the complete opposite of what we saw in 2017 when the major stock indexes rallied straight up without a single 1.0 percent pullback session. These days, the markets can trade 1.0 percent or more within a few hours or less. As traders, we now have to adjust to the new environment of much higher volatility.

There are so many things causing these volatile markets. First, there is the Federal Reserve and the higher fed funds rate. The central bank has continued to raise interest rates as the U.S. economy started to strengthen, but that could be on pause soon after the next rate hike due on December 19, 2018. Second, there is the U.S. / China trade war. Yes, this is a trade war and it is still playing out right now. Markets are tired of the mixed messages and seem to be selling until there is a solid resolution. Third, the European problems continue to remain unresolved as BREXIT and the Italian budget issues remain front page news. Forth, there is the Robert Mueller investigation over Russian collusion and the Trump administration. Fifth, the democrats won the House of Representatives in the mid-term elections. This could lead to more investigations for President Trump in 2019. Six, the falling stock price in Deutche Bank (NYSE:BD) is signaling real trouble for the banking giant and maybe others around the world. Seven, the collapse of General Electric (NYSE:GE). This once iconic company is now a single digit equity trading under $7.00 a share. This hurts market sentiment as many investors had GE in their portfolios. There are also many other issues that seem to be pouring in from many other places.

Technical trading is now back in full force as people are now abandoning the fundamental picture. So here is the current technical outlook. The S&P 500 (NYSE:SPY) tested the $280.00 area on November 8th and December 3rd. From that technical resistance level the SPY has sold off and is currently breaking below its October 29th low today. There are two more pivot support levels that are now in play and they are the April 2018 lows at $254.67 and the February 2018 lows at $252.92. Most technical traders are watching to see if the institutional money will try and defend these key support levels. At this stage of the correction, traders must simply take it one day at a time. Traders must now also watch for high volume reversal days, that can sometimes signal a meaningful turning point and a possible bid for stocks. This is just one of many things to watch for when trading an EKG market.





Nick Santiago
InTheMoneyStocks