The markets appeared to be making an oversold bounce today; however, another round of selling sent them even lower into the close. The INDU made a 600 point swing today – up over 400 points earlier in the day and then closed down 205 points to end the day.
Today's action is the continuation of the same move that started last Friday, as the markets continue to search for support. The market action today is a testament to why we need to see the formation of a pivot point before taking action in directional trading. This amount of volatility can be dangerous and unpredictable and guessing here will just cost you money...no reason to try and catch a falling knife.
We have seen some overseas weakness, specifically out of China. However, there really isn't much in the headlines to warrant this type of market reaction. That being said, there is an enormous amount of fear driving this current move and we should continue to expect high volatility.
If you are going to take new trades here, then ensure that they can survive this volatility. Consider lower position sizes and increasing trading ranges for better probability. Options could be a little more expensive here and have wider than average bid/ask spreads. Make sure to take this into consideration when entering or adjusting positions.
Have a great night,
The Maverick Trading Team
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