The latest update of the Consumer Price Index showed that inflation is slowing a bit. While it is still high, it is not as high over the same time period last year as it was the when we got previous updates. And you can hear Wall Street cheering around the globe. For a minute at least.
We are also glued to red vs blue news feeds with the balance of the senate teetering precariously. The final outcome could have a pretty big impact on stocks but like a streaming drama series, each perceived conclusion only opens another cliffhanger. We talked a bit about it on Monday but the only certain that will come from this is volatility.
So when looking at trades today we have to find a way to determine which of those key factors are going to drive the next market move.
The key to trading is to tone out the noise and let the market tell you what is important to traders, not the media.
The green line on the chart above shows that the bear market rally back in March and then again in August felt like we were seeing the end of this current downtrend. But both failed and we continued lower. Good inflation numbers seem like they could be at the root of the decline and appear to be a sign of hope, but we need to see more confirmation on the charts to make that believable. The blue line shows us that we are still in a downtrend and the MACD is showing a potential cross down. That may waiver with today’s glimpse of optimism but we are unlikely to see a reversal.
With the election likely to drag out and stir uncertainty, we should expect to see more swings as this continues to be one of the wildest rides down the market has ever seen.
Lee Gettess not only has put together some tools that validate a reversing trend with uncanny accuracy but he also has developed ways to trade those exhausted trends that have the potential to be quite lucrative. You can check out his approach here.
Keep learning and trade wisely,
Market Wealth Daily