Authored by Sven Henrich via NorthmanTrader.com,
Some thoughts on the current market situation: Awe-inspiring volatility in markets these days and headlines keep coming non stop.
It’s heaven for fans of volatility and action, but it’s also a very dangerous time for traders. The temptation is to chase every headline and every move.
$DJIA flies up over 1,000 points and drops another 1,000 the next day and then repeats. Just 2 weeks ago we were staring at 2-3 handle ranges on $SPX intra-day for hours on end.Things have changed for now, get used to it.
Bears are having a blast right now, just accept it:
Bears these days…. pic.twitter.com/X3n4aTNtg4
— Sven Henrich (@NorthmanTrader) March 5, 2020
Everybody can choose to approach these things as they wish, but my general view here is this:
People associate the headlines with the market action.
Yes, they clearly have an influence, but don't lose sight of the technicals.
They are a great guide especially during highly volatile times.
My view fwiw: Don't chase every move, but rather choose wisely when/where to engage.— Sven Henrich (@NorthmanTrader) March 5, 2020
The message: Keep calm and look at the larger technical picture and choose wisely when and where to get engaged.
For anyone that had positioned short into February last week was fantastic. Bulls that had their fun riding the Fed liquidity and either listened to the warning signs and got out or are trapped at much higher prices. That’s the nature of the beast and now we’re in a period of wide range chop:
I submit that nothing what we are seeing here currently is unusual, except it is more violent now with tons of uncertainty thrown in including the concern that central banks finally lose control.
I’ve described the situation as binary and it remains to this day. Central banks either will maintain control or they won’t. The virus situation impact will either be short and painful, or it will have longer term ramifications. Unknowable at this very moment.
But as you can see in the chart above we’ve had periods like this before, a bunch of back and forth while markets negotiate the price action that ultimately it either resolves higher or lower. Genius I know. But that’s just reality.
The key, from my perspective, is not to get chopped up in the wild back and forth, but rather be elective, identify potential patterns and levels and then act on them, but also not be stubborn about anything. Everything is a trade at the moment and being opportunistic helps.
My attitude here is to look for spots that look interesting, test out the levels and if they work (short or long) then ride the counter move and scale out along the way.
I showed an example from our subscriber feed on twitter yesterday (see thread), this one from the long side identifying the pivot price zone to come:
then highlighting the engagement zone:
And then we saw the violent reaction to the upside yesterday:
This pattern remains unconfirmed and looks to be in trouble as of this morning, but that was a massive rip to the upside yesterday as markets moved 4% higher in a day. And that’s the point: These markets are massively volatile at the moment and one has to pick one’s spots to get engaged in and then be flexible enough to also reduce risk and lock in gains on moves such as this.
When else will you get 3%-4% moves every day? The answer is very rarely.
At market extremes people tend to get very caught up of what could happen. Just a few weeks ago everybody was rising price targets everywhere and people were screaming buy buy buy. Now we see people getting ever more bearish and calling for ever lower price targets. Stop. It’s pointless making grandiose predictions right now and get caught up in them. Yes, anything can happen, and I also remain very much open to a structural bear case, having made it repeatedly on the way up and calling out the risks.
We are engaged in a massive battle for control here between central banks, the structural problems in the global economy and now a crisis that has popped on the scene out of the blue.
Markets may appear to be in panic mode right now, but that doesn’t mean we need to be. Rather our job is exactly the opposite. To keep calm and not lose sight of the bigger picture, and most importantly: Not lose sight of the technicals as they help guide us through this mess.
* * *
For the latest public analysis please visit NorthmanTrader. To subscribe to our market products please visit Services.
••••
The Liberty Beacon Project is now expanding at a near exponential rate, and for this we are grateful and excited! But we must also be practical. For 7 years we have not asked for any donations, and have built this project with our own funds as we grew. We are now experiencing ever increasing growing pains due to the large number of websites and projects we represent. So we have just installed donation buttons on our websites and ask that you consider this when you visit them. Nothing is too small. We thank you for all your support and your considerations … (TLB)
••••
Comment Policy: As a privately owned web site, we reserve the right to remove comments that contain spam, advertising, vulgarity, threats of violence, racism, or personal/abusive attacks on other users. This also applies to trolling, the use of more than one alias, or just intentional mischief. Enforcement of this policy is at the discretion of this websites administrators. Repeat offenders may be blocked or permanently banned without prior warning.
••••
Disclaimer: TLB websites contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to our readers under the provisions of “fair use” in an effort to advance a better understanding of political, health, economic and social issues. The material on this site is distributed without profit to those who have expressed a prior interest in receiving it for research and educational purposes. If you wish to use copyrighted material for purposes other than “fair use” you must request permission from the copyright owner.
••••
Disclaimer: The information and opinions shared are for informational purposes only including, but not limited to, text, graphics, images and other material are not intended as medical advice or instruction. Nothing mentioned is intended to be a substitute for professional medical advice, diagnosis or treatment.
Leave a Reply