Over the last few days indexes recorded gains and then losses and then repeated the script, a day of gains, followed up by another losing day! That was the story of the last 4 trading days, causing frustration for market players with a clear inclination towards a particular direction. This is the normative price movement for our current trading range, which obligates traders to adopt a more neutral stance, flexibility, great. Dogmatic bulls or bears are missing out on the sheer number of opportunities in the current market.
President Trump cancelled the North Korean summit that had been planned for June. In a letter he sent to North Korea’s Kim Jong-un, he wrote, “Sadly, based on the tremendous anger and open hostility displayed in your most recent statement, I feel it is inappropriate, at this time, to have this long-planned meeting.”
Trump later stated that he is still open to discussions with North Korea but noted that the U.S. army is ready to respond to any act of aggression.
It would seem that events of this proportion never succeed in creating the negative momentum of the ilk bears have long awaited. Since the very day Trump was elected, the bears were sure that he would prompt a series of market sell-offs which would eventually push indexes into highly anticipated price correction territory. In its stead, what happened is that every initial drop draws correction buyers and when the rebound doesn’t fizzle out, more buyers build up the confidence to get in on the action! Time in and time out, it’s paid to buy every Trump-induced decline, yesterday being a case in point.
The market initially responded negatively to the news, the S&P 500 falling almost 1%. But then, correction buyers surfaced, stabilizing matters with a strong rally from the bottom. In summary for the day, the S&P 500 fell just 0.2%, the NASDAQ indeed closing in the red, but negligibly off by just 0.02%. What perhaps stood out the most was the Russell 2000 (IWM), which succeeded in returning to positive territory by the time the closing bell pealed. This was a noteworthy development, seeing that the Russell had recently served as a focal point for traders, after having recently recorded a series of new highs. Many traders believe that things souring on the Russell could kill market momentum. And that’s why it was important to see it stabilizing yesterday.
At the same time, while we saw a calming in stock movement, Gold (GLD) soared over 1%, and returned to trading above the highly looked to level of $1,300 an ounce. This level had served as substantial support since the beginning of the year before having broken down and falling beneath this level in mid-May. This level has now morphed into resistance. It will be key and riveting to see whether rising North Korean tensions lead to a bonafide rally in gold!
The economic front showed mixed figures: weekly unemployment claims came to 234,000, slightly above the consensus but rather low on a historical level. New home sales recorded an April decline of 2.5%. Economists had expected a moderate decline of just 0.2%.
In summary: yesterday’s intraday price movement reflected the type of movement that we see in a trading range. Neither the bulls or the bears are succeeding in creating enough momentum to foster a trend with continuity. Sentiment has changed course time and time again, both sides responding in a hyperbolic and exaggerated way to the movement at play. The key as of now is to look for trading opportunities created within the price range – and the news involving Trump. You can’t the larger picture with the tectonic oppositional forces of the bulls and the bears distract you! One can’t possibly anticipate news events the likes of North Korea, but they do create fantastic opportunities for those who give them the attention they deserve.
Friday: The latest geopolitical developments are expected to continue to affect trading today. Likewise, economic releases – durable goods orders at 8:30 N.Y. time and the University of Michigan Consumer Confidence Index at 10:00 – are expected to command attention.
Traders are expected to respond to the earnings numbers released yesterday after closing. They include: GPS, ADSK, ROST.
Before the opening bell, be primed for the numbers of FL and BKE.
Trading is expected to be especially busy in the first 2 trading hours, some traders expected to close positions earlier than usual in light of the long Memorial Day weekend. On Monday markets will be closed for trading.
Have a great trading day!
Today’s Picks – Day Trading!