Look Beyond the Chop

Depending on your perspective, the S&P 500 either suffered or enjoyed its largest trading range of the years.

Stocks ping-ponged as they shrugged off a disappointing Fed announcement and then screamed lower when President Donald Trump posted over Twitter that he will be raising tariffs on some Chinese goods starting Sept. 1.

Just this morning, some of the trade negotiators had stated that progress was being made on a China deal, and that more meetings would be held in September, so the tariff news caught most everyone by surprise. Trump tweeted several additional comments about China, which may just be part of his negotiating tactics, but were not market-friendly.

The indexes have now seen two days in a row of action with major swings. The conventional wisdom is that a jump in volatility is an indication that sentiment is shifting, and that a market turn is developing. If you look back at the action in early May and early December of last year, the increased volatility did signal a change in market direction.

The biggest challenge in this sort of market move is that technical setups don't work very well. Traders are whipsawed as breakouts fail to hold. On the other hand, there can be some good opportunities from over-actions.

When it is this choppy the important thing is to make sure you are protecting capital. New setups will develop once the indexes stop jumping around. The volatility may be unpleasant, but ultimately it will lead to a new crop of opportunities.

Have a good evening. I'll see you tomorrow.

At the time of publication, James "Rev Shark" DePorre had not position the securities mentioned.