This week we come to the final days of 2018. A year where we saw the markets go through some explosive moves. In addition, the market was closed a half day on Monday as well as all day on Tuesday for the Christmas holiday. This is usually a time where many traders take time off and we see prices become a bit more choppy. While the market looked like it was going to end the year on a very bearish note, the last three trading days of this week turned things in a bullish direction. Wednesday we even had a record move as the price of the Dow Jones 30 Futures move higher by more than 1,000 points. This was a strong showing but the bulls and a possible sign that prices want to move higher after the strong bearish move we saw throughout December. We do have one more trading day on Monday to close out the year.
One thing that we need to recognize when looking to take trades is the deliberate way price is moving. If price action is non-deliberate, we need to be careful that we don’t caught taking the trade, just to say we are trading. It would be much better to sit out and wait until our setups happen in a deliberately trading market. This will allow us to have the highest probability for success.
Let’s take a look at how the markets performed this last week.
In our last report, we talked about how bearish the DJ-30 has been. At that time it had broken below the support area and made a strong run lower. There didn’t seem to be much in the way of support happening. Even this week, on Monday, we saw another strong bearish move down in the pre-Christmas half day of trading. It wasn’t until the day after Christmas that we saw the bulls come rushing back in. On Wednesday, we saw the DJ-30 run up a record 1,000+ points, then on Thursday we saw it go from being down 600+ points to closing up over 200 points. These are some wild swing and it shows how important it is to use good risk management in all our trades.
On the chart of the SP-500 you can see a very similar price pattern to the one of the DJ-30. The week before last was a strong bearish trend down, followed by a strong move up after the Christmas holiday. As price moves back up, we will want to see if it runs into the old support area then push back down again or if it will be able to break above it and continue to move higher.
We will see what happens in this New Year.
Last week we said that the NASDAQ did not have as much of a bearish move as did the other two markets we look at. This week the push higher has put us right up against the old support level and an area where we may see some downward pressure coming in as resistance. Often times you will see the old support act as the new resistance. We will watch to see if this get the bears back into the NASDAQ to push prices lower as we move into the new year.
Remember, the markets will be close on Tuesday of this next week for the New Year's Day holiday. Make sure you make any adjustments you need to protect your capital as we wait for the markets to begin trading more deliberate. Have a happy new year!
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