News-Driven Market Strategy

Yesterday started out with some promise, as there was a good gap pullback trade from the 20-period EMA on your five-minute charts for both the SPX ($SPX.X | Quote | Chart | News | PowerRating) and Dow ($INDU | Quote | Chart | News | PowerRating). The (QQQ | Quote | Chart | News | PowerRating)s which had better relative strength only pulled back to the 8-period EMA before advancing again. However, it was not to be after Secretary of State Powell started talking about the UBL tape. It was trend down after that, with the best short setups for the major indices coming around 2:00 p.m. ET from head-and-shoulders patterns, and below all of the 8, 20, 60 and 260 EMAs on the five-minute chart.

NYSE volume was 1.3 billion, a volume ratio of 30, and breadth -523. Both the SPX and Dow finished red, with the SPX at -0.8% and the Dow -1.0%. There was some divergence, as the QQQs gained 0.5% and the (SMH | Quote | Chart | News | PowerRating)s +0.7%.

Under the current circumstances where every market movement is controlled by news bites, it is obviously prudent to reduce position size and only take the best of setups. On the stock side, I continue to look for any kind of narrow-range volatility-type patterns that can be played in either direction. It seems to fit this news market.

Have a good trading day.

Five-minute chart of Tuesday's SPX with 8-, 20-, 60- and 260-period EMAs

Five-minute chart of Tuesday's NYSE TICKS