09Oct11:05 amEST

Eventually We Need the Real Deal

A more positive spin on the China trade war saga unfolded overnight, with hope for at least a partial deal sending futures higher which is spilling over into the cash session this morning.

While I did not sell out of any longs into yesterday afternoon's final hour swoon, I also have been reticent to chase up bounces like this morning's. In essence, as we have been discussing with Members, the best way to defend against the random, violent moves of this market spawned by random, at times absurd, China trade war headlines, is to slow yourself down in terms of the amount of trades you are making, which includes making sure you are not being shaken out too easily during the downdrafts, too. 

Eventually, this market will likely need at least some variations of a real deal regarding China in order for us to move on to another, hopefully smoother type of market regime. But in the meantime we all seem beholden to the headlines which can hit at any moment, good or bad. 

At this point, it is probably fairly easy to expect this bounce to fizzle out, given the market's recent history and seemingly diminishing returns when we rally on hope for any trade deal. if the QQQ ETF for top Nasdaq stocks can take out $188, above, however, it would add credence to the idea that we just made a daily chart higher low yesterday versus last Thursday's lows. 

In addition, shorts may have trapped themselves badly in certain names this autumn. Restoration Hardware Holdings, Inc., for example, below on its daily chart, has performed exquisitely as part of the hot housing-related retail space. RH is a very heavily-shorted stock, and one must wonder when shorts will be able to take this name down if they have failed miserably to do so during this market whipsaw.

Whenever the dust clears in the broad market, therefore, RH looks ripe to devastate those shorts who look to be clearly wrong in this name. 

Stock Market Recap 10/08/19 ... We're All Just One Trade Dea...


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