Volatility Surges as Rotation, Big Headlines Hit Market
Here's my game plan as the banks report, crypto finds support and the Russell outperforms amid rotational shift.
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The market is under mild pressure for the second day in a row on Wednesday morning. The looming possibility of a Supreme Court ruling on the Trump tariffs is driving some of this increased tension, but the poor response to JPMorgan’s (JPM) earnings is causing some additional concern. JPM posted softer-than-expected results and saw a surprise drop in investment bank fees. The stock also took a hit following President Trump’s comments regarding a 10% cap on credit card interest rates.
The entire banking sector looks weak right now, but I am waiting to see how the market reacts to Bank of America (BAC) , Wells Fargo (WFC) , and Citi (C) as they report this morning. We also have economic data on the docket, with wholesale inflation and retail sales numbers due. Meanwhile, gold and silver continue to ramp higher as investors worry about Iran and other global political issues.
Crypto Finds Support
While speculative traders have been primarily focused on silver and gold lately, one notable development is the improved technical action in Bitcoin and Ethereum. The cryptocurrency group has been in a downtrend since mid-October, but I see signs that a support level has developed and is providing a foundation for a bounce. IBIT (IBIT) is back over its 50-day simple moving average. If it can hold here, it will likely attract some bottom fishing traders.
Rotation and Regulatory Shifts
The Russell 2000 continued its outperformance early this week, but it was a very sloppy session. We saw many stocks pull back alongside isolated pockets of positive momentum. This mix of action is a symptom of the elevated rotation we have been experiencing. I also notice the Magnificent Seven continues to underperform despite some softening of U.S. regulations on the export of Nvidia’s (NVDA) H200 chips to China. China is actively discouraging these purchases and placing restrictions on cybersecurity software from companies like Broadcom (AVGO) , Palo Alto Networks (PANW) , and Fortinet (FTNT) .
My Trading Strategy
My game plan is to watch stop points closely for potential breakdowns. It has been a good run, and I am focused on keeping accounts close to their highs. I am also looking to buy favorable technical patterns as we move into fourth-quarter earnings. While intraday volatility is difficult due to randomness, I am looking for buyable setups as the earnings season heats up. I discussed several trading approaches in my column on Tuesday and will have more.
The bears are grumbling about another potential top, but at this juncture, all I see is elevated volatility that offers more short-term trading opportunities. If a top is forming, it will take a while and be a very bumpy ride before a full downtrend develops. I suggest you stay opportunistic.
At the time of publication, DePorre was long NVDA.
