sharp decline in equity futures tonight
11 responses | 0 likes
Started by greenman - May 5, 2019, 9:29 p.m.

apparently due to tariff threat from Trump.  this move illustrates the danger of holding positions overnight.

By metmike - May 5, 2019, 11:01 p.m.
Like Reply

I must be's my terrific, gifted friend that I haven't heard from in over a decade!!!

Welcome back greenman!

Your point couldn't be overstated too. And this sort of thing happens all the time in extraordinaily sensitive weather markets...........when the weather forecast flips from being bullish to bearish or vice versa suddenly.

Case in point,

I know that the entire move this evening in many of these markets is from the China news. However, the trade in  corn has been from the long side based on too much rain causing delays in planting..........which has been supportive to prices since the lows back on April 25th........when CN spiked down to 351.5, then reversed higher(confirming the set up for me). 

The trade set up was being long on a continuation of more rains in the forecast( but considering being short on a big change to drier).

Late in the week, weather models started turning drier and left me closer to being neutral and more careful about holding a weather position over the weekend from the long side..............luckily.

Luckily because being long on the close Friday because of too much rain for planting in the forecast, when the forecast turned drier on Saturday and even drier yet on Sunday would have already been the recipe for a big loss on the open Sunday Night, not even dialing in the affects of the tariff news which have been putting enormous selling pressure on. 

As you know better than anybody, NOT losing money is sometimes just as rewarding to those that appreciate preserving capital as MAKING money is. 

So how do you trade in an environment like this?

Stops do absolutely no good when the market moving information hits while the markets are closed.

For me, it would be to trade smaller positions when holding after the close. I personally would not avoid great set ups because of this since this is sort of how volatile/sensitive  weather markets trade(and you know how the weather can change).

The difference is that, despite the weather being somewhat unpredictable and big changes happen on a weekend, the news about China/tariffs is completely unpredictable. If you are trading a market based on your usual set ups, technical, chart patterns, fundamental, seasonal trends or whatever, you have access to all that information and that stuff doesn't change overnight or over a weekend..............but the news does.

If the  unpredictable news, becomes potentially more powerful than all your other indicators, then at the very least DO NOT load the boat on a position type trade which leaves you completely exposed to the news going the wrong way. 

Shorter term/day trading makes more sense in this environment........though our current situation almost never happens for most markets. This China news affecting market prices profoundly in wild spikes is unprecedented in duration. It occurred numerous times last year in the grains. I think the beans had a few 30c moves instantly from tarrif news.

Let's hope this gets resolved soon for those that prefer to hold positions when the markets are closed. 

By metmike - May 5, 2019, 11:19 p.m.
Like Reply

While the surprise  news about China tonight that has strongly influenced the price in some markets would not exactly qualify as a text book "Black Swan" event by some standards,  this concept  and the risks from it do apply here, even though most people think about a Black Swan Event as having occurred on a much more grand scale).

 Black Swan Event

 An event or occurrence that is extremely difficult to predict

"For example, the imposition of a steel and aluminum tariff by the President of the United States may be considered a black swan event."

What a coincidence with the example they picked. 

By WxFollower - May 6, 2019, 3:52 p.m.
Like Reply

Wow, what a comeback! Folks bought the dip. What will tomorrow bring?

By mcfarm - May 6, 2019, 4 p.m.
Like Reply
By metmike - May 6, 2019, 5:21 p.m.
Like Reply

Thanks mcfarm!

US shares pare losses after Trump tariff threat to China

By joj - May 7, 2019, 2:47 p.m.
Like Reply

Markets getting hammered.  I’ve been wanting to sell S$Ps on the announcement of a deal.  But the president has indicated no deal coming.  Perhaps buy the market on the actual implementation of the 25% tariffs.  

Trump is mistaken when he says “we lose 500 billion to China every year”.  That’s like saying one loses 20K when buying a car.  No .... you have a CAR!!

By metmike - May 7, 2019, 3:56 p.m.
Like Reply

"Trump is mistaken when he says “we lose 500 billion to China every year”.  That’s like saying one loses 20K when buying a car.  No .... you have a CAR!!"

But then, where did you get your money to buy that car?

If you work in an industry in the US that sells stuff............ and people in the US buy the stuff that you make, not from your company but from companies that make it in China........your company, government and you lose.

I do not have a strong opinion on this particular topic(though leaning against the tariffs) but don't like the tremendous uncertainty that it causes in some markets. So this is not defending the position(500 billion is probably an exaggeration) ..just explaining it. 

By joj - May 7, 2019, 5:36 p.m.
Like Reply

As I have said before - I support Trump’s effort to make China trade in a fairer manner.  Too bad he alienated our allies. We could use their support in the effort.  

If a US producer is losing as you say then the US consumer is gaining.  

By metmike - May 7, 2019, 6:04 p.m.
Like Reply

"If a US producer is losing as you say then the US consumer is gaining. "

A US consumer needs to be a producer to sell something or work for a company that sells something so they have an income to use to consume stuff.

By joj - May 7, 2019, 9:06 p.m.
Like Reply

Stop saying I missed the point.  I understand perfectly.  I made a counterpoint.  Never mind.

By metmike - May 7, 2019, 11:38 p.m.
Like Reply

I changed the previous post to take that part out for you Joj.