Early Morning Review – Friday 14 Nov.

While we enjoyed a well deserved holiday on Thursday, the US markets went through some ineteresting phases. With a big decline on wednesday and then an equally big rally (a bit more) on thursday. We start trading with the most markets covering up their losses.

For short term, momentum traders, this is indicative of an up move. Do not try to go short today, or even next week while this up move continues. Eventually, resistance will emerge around 3200.

For Investors / Position Traders, such choppy markets are confusing. This is a pity, but we have to accept what the markets tell us. The markets are telling us the primary trend is down, with a lot of volatility that is virtually un-tradeable. If you are an investor, buy on panics with a 3 to 5 year time horizon. Invest small parts of your capital – since there can be many panics. For position traders, in theory it is possible to buy during panics, and sell on rallies. In reality, this is not easy to do in volatility. What defines the end of panic ? Not clear. Yet, with stop losses, small volumes such trades can be taken. Some of them will result in getting stopped out – so be it.