Stock Market Continues To ‘Walk Down’
The stock market finished with another wobbly day while traders seek to find potential setups as price action continues to “walk down.”
After a choppy session Wednesday across all three major indexes the Dow was the only positive – gaining just 1.58 points on the day.
The midweek point marked the fifth down day for the S&P 500 and the Nasdaq again topped all losses, down .51%.
With the New Year fast approaching, traders must contend with a list of variables that could affect any rally into the holidays.
Stock market continues ‘walk down’ into holidays
Prices across the stock market couldn’t gain any traction throughout the session today.
The Dow closed at 33,597.92 points to finish flat at 0.00% (dropping 1.58 points on the day). The Nasdaq dropped to 56.34 points for a .51% tumble while the S&P 500 ticked lower by .19% to 3,933.92 points.
“The market has given back a lot of gains over the last few sessions,” said John Carter, Founder of Simpler Trading.
He referred to current stock market conditions as a “walk down” – no frantic moves by market participants, just steady, relentless selling. He watches the eight-period exponential moving average (EMA) on a 15-minute chart showing how the market continues to “walk it down.”
John sees this market as volatile with no definitive directional signals in play.
“This is a short-term trading market and we want to be aware of that,” said John, who has adapted his active trading strategy from swing trading to day trading. “I don’t think we’re going to roll over and die.”
“I’m not saying that this looks great,” John explained. “There is the idea that we’re going to have some huge decline and we’re going to take out the lows into the end of the year. I don’t think that’s going to happen.”
Trader keys on these areas for potential setups
John continues to watch the U.S. Dollar Index (DXY), bonds, the Volatility Index (VIX), interest rates, and the indexes (particularly the S&P 500 – SPX) for indications of directional movement in short-term setups.
“We’ve got a situation where I think we have some strong uptrends happening in the bond market, there is going to be a handful of stocks doing well, and in the indexes we just want to be able to catch any moves,” John said.
More and more he is “digging into” each of these areas of interest to find trade setups.
“The big picture is helpful and interesting to a point, but we still want to find some higher probability ways to make money in this environment,” said John, who has success using his latest trading strategy focusing on “quick hits.”
Traders should consider the influence of monthly options expiration at the end of next week along with important upcoming news events.
Economic data releases on the horizon include the U.S. Producer Price Index (PPI) on Friday and the U.S. Consumer Price Index (CPI) on Dec. 13. The much-anticipated Federal Open Market Committee (FOMC) meeting is set for Dec. 14 where the next round of raising benchmark interest rates is expected.
“I don’t see this market falling over and dying, but I do see some trading ranges here and would like to get aggressive and take advantage of them,” John said.
To get an inside look at how John puts together daily trades, take advantage of the Simpler Trading Austin Mentorship streaming live starting this weekend. Take advantage of this interactive, live-trading experience!