Helping Self-Directed Investors Succeed Blog - Navigating Around These Volatile Markets as of August 25th, 2019

Navigating Around These Volatile Markets as of August 25th, 2019

August 25th, 2019

The US-China Trade War appears to have intensified and the next phase is very important for the health and well-being of both economies. While in the long term US is likely to prevail over, near term pressures in the economy will be felt strongly. Wall Street is clearly becoming nervous with the S&P 500 plunging nearly 2.59% this past Friday. The NASDAQ tumbled 3%.

If anyone has a crystall ball on what's going to happen next in this tremendously volatile situation, please be our guests. For self-directed investors there is plenty of uncertainty to navigate around. For traders who focus only on the long side, this may be the best time to stay in cash. Traders who are comfortable taking short positions may find good opportunities in weak stocks as long as they can stay disciplined.

Self-directed active investors may do well to closely monitor the price action in these three bellwether ETFS over the coming weeks/months. The S&P Industrials SPDR (XLI), S&P Transportation SPDR (XTN) and the influential, tech heavy NASDAQ 100 Tracking ETF (QQQ).

XLI closed a touch below its 40-week SMA this past Friday. XTN is well below its 40-week SMA. The QQQ is positioned above this key level, for now. The QQQ has met with resistance on its 10-week SMA line and this is generally not a positive sign. Over the next few weeks, bullish investors will need to look for XLI to find strong support around this level and XTN needs to cross over this line and the QQQ should manage to continue to stay above or find support about this level.

There is a strong case now for the Fed to cut rates even further if the effects of a continuing trade war start to impinge on economic growth sharply. The big question is: Will the Fed Rate cuts help to stem the tide? The action in these ETFS will provide a technical perspective for self-directed investors.

Past US economic data point to recessions succeeding tariff increases. While hoping history doesn't repeat, investors may do well to be cautious and curtail impulsive buys.

For long-term, self-directed passive investors this may be the time to review their portfolios for rebalancing opportunities. The S&P 500 Tracking ETF (SPY) is still nearly +14.98% higher year-to-date and that's impressive.

Good Luck and Happy Investing!

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