Friday's Market Minute: Bazookas And Whipsaws

Thursday’s equity index futures session began with a premarket bang from the European Central Bank’s monetary policy “bazooka” in the form of rate cuts down to -0.5% and ~$22 billion per month in quantitative easing starting in November. Shortly after, reports of an interim U.S./China trade deal rallied markets, which promptly fell flat after the Trump administration denied any such deal.

Nonetheless, all four indexes chugged upward into new 20-day highs and three of the four finished green on the day with Russell 2000 futures as the only laggard. Despite the intraday whipsaw price action, markets seem buoyant after the recent upward breakout through a month-long resistance zone, reflected in the VIX briefly dipping below 14. Bulls likely will be looking for S&P futures to take out the previous high of 3,029.50, with a corresponding a new peak in the daily RSI which is presently negatively diverging from price.

However, there could be a new sense of optimism for the Trade War this morning as reports indicate China plans to ease tariffs on U.S. soybeans and pork, granting some upward impetus to equity futures in the premarket. This headline risk-heavy environment can make for frustrating whipsaws, and makes it more important than ever for retail traders to stay risk-defined, stick to established trading systems, and keep a cool head.

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