“The $25,000 Question”
Now that the DJIA has closed above the $25,000 mark for the first time, the big question in everyone’s mind is “what next?”
I don’t have the answer. All we can do is avoid the emotion and hype and look “Beyond the Noise.”
You can find analysts and talking heads staking their reputations on this being the top of the market, with a correction looming any day now, and an equal amount declaring that this is just the start. The truth is; no one knows.
The best we can do is trade the current reality, which is that we are in an unbelievable Bull Market that continues to put in new highs. The thing to guard against is emotional trading. Whether you feel that you are missing out and need to go “all in,” or that a correction is imminent, and you need to be “all out” you are probably wrong. Taking trades that meet your criteria AND exercising disciplined risk control are the keys to consistent, long-term profitability.
When the inevitable correction, which history tells us Will Happen, begins, we will have warning. We cannot catch the absolute top, but we will see the pattern forming and will have time to trade the market down in a calm and controlled and profitable manner.
We have some big things on the horizon that bear watching;
• Q1 2018 earnings season kicks off on January 17th with Alcoa reporting. Earnings and the forward-looking statements of companies, are important underpinnings of the market. We’ll need to watch closely to the reaction to this information.
• January 19th is the current deadline for Congress and the Executive branch to agree on budget issues and avoid a Government shutdown. Of course, the “shutdown” is an artificial construct and is used as leverage in the negotiations, but the rhetoric will be intense and may cause some short-term volatility in the markets. We’ll watch this closely as well and see if any trading opportunities emerge.
I’ve included a quick analysis of Bitcoin futures in the video. You’ll want to take a look and see how that is shaping up. At this moment, we have an impulsive move down (when the futures first launched) with a textbook retracement. The next move could be down even more in an impulsive continuation.
Gold is Bullish, as it has been pretty much all of 2017. Don’t be surprised if we get a pullback before starting the next move up. I’m sitting out until that happens and then will look for new entries.
Oil put in higher prices than we have seen since 2015. An impressive rally to be sure. If it continues in this trend, what we see is a correction to the massive drop in 2014/2015. If that happens, the technical analysis has a price target with a mid-point of $85. That won’t happen overnight, it will take months to play out and we could well see a decent pullback first. It won’t be smooth, oil is a volatile monster and traders need to be aware of that and plan trades accordingly.
That’s it for this week. Trade safe, follow your plan, control risk.