Weekly Forecast: Stock Market Suffers Worst Week of 2017
The SP500 stock market dropped 1.3% last week, as United States and North Korea tensions heated up.
North Korea said that their army is “on standby waiting for an order of attack”. Donald Trump gave aggressive rhetoric and words of caution that they are also “locked and loaded”.
Equity markets got very nervous on this escalation right after hitting fresh highs Tuesday on the close of trade in Europe.
By early afternoon the sell-off unleashed on increasing volume.
While prices stabilized through Wednesday, Thursday saw an equally fierce drop with increasing volume and it held right into the close.
In light of this weakness in risk assets, bonds, gold and volatility increased. In our Market Analysis Live subscriber webinar (included in all of our subscriptions here) we talked about the prospect of a massive long volatility spike to wipe out the short volatility trade. It is likely upon us now.
The weekly market tally is as follows:
- Gold is up over 2.50% (bottom right)
- Silver is up 5.23% (not in chart below)
- 30 Year Bonds in the US are up 0.70% (bottom middle)
- Volatility (VIX) is up 55% (bottom left)
- US dollar is down 0.40% (top right)
- Oil prices are down 1.5% (top middle)
In fear of a stock market crash and the insatiable desire for Bitcoin from Asian investors, the price for one Bitcoin has surged to an all time high to $4,070 USD.
Bitcoin momentum continues to hit new highs on increasing volume and rising momentum. We think the price is too high to buy, but too firm to sell. So this puts us in a holding pattern on Bitcoin.
Looking at the stock market sectors, the weekly tally is:
- Utilities are up 0.02% (orange) and is the only sector positive, as expected during a bearish move
- Technology is down 1.04% (purple)
- Energy is down 2.22% (red)
- Financials are the weakest, down a total of 2.58% (green)
Donald Trump Wages Trade War with China
The big news this upcoming week starts on Monday morning, with Donald Trump reportedly about to launch a new trade crackdown on China first thing in the morning tomorrow.
Why would Donald Trump do such a thing?
He believed that China would be able to persuade Kim Jon-Un and North Korea to shut down their nuclear program to help the United States.
With this news, we found out this morning at 11:13AM EST on Sunday that Chinese President Xi Jinping is committed to the denuclearization of the Korean Peninsula.
China’s president Xi has previously said that they do not support a change in regime in North Korea. So today’s message is most likely an effort to soften the conversation for the trade war this week, but with no long term intention of supporting the US with the goal to stop North Korea from advancing their nuclear program.
Overall, this week can get very messy in the market, which will create a lot of day trading opportunity.
During times of high volatility, it is very important to be part of a group of traders so you can trade as a team, not alone.
Check out our Day Trader PRO package, with our live community day trading room from 9am to 11am EST Monday to Friday.
Stock Market Weekly Forecast: Economic News
Here is a list of this week’s high impact economic news.
Monday is a slow day, but with Trump’s trade war announcement against China, it may be the most volatile day of the week!
This Tuesday we see retail sales figures out of the US, a very important indication of consumer sentiment.
Wednesday is oil inventories, building permits and the FOMC meeting minutes which will be very important for traders.
All eyes will be on the balance sheet unwind and the futures of further interest rate hikes.
Thursday will be another look at unemployment claims in the US, which ends the calendar for the week for US data.
How to Trade the Stock Market this Week
The one word answer is carefully.
The summer might be over early this year, as we expect to see a surge in volatility which can be troublesome for swing traders who could be stopped out of their positions.
If you are a swing trader, look to set wider stops, which means take smaller position sizes to adjust.
As a day trader, you are about to get paid, look for small and probably moves in the direction of the trend and increase the lot size as volatility increases.
Better yet, sign up for our day trader pro package and join our live trading room, or our options pro membership and get access to live webinars, our options strategy courses, education, newsletter and much more.
You can sign up for both packages and save 22% monthly!
Good luck and good trading.
Remember – manage risk first, the profits will come to those that succeed as risk managers.
The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.