Stop Losses – A Necessary Evil

Stop Losses

I got stopped out of one of my trades today….I hate being stopped out as much as the next person. But in this game you cannot avoid losses. You just have to make sure they are small. I rather like the picture above almost as much as I like George Soros’s quote about trading:

“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong”

The market has been trading in a tight range for almost 2 weeks now. Shifting between 2060 and 2120 in the ES S&P 500 Futures. I have been expecting it to break higher, but negative news keeps dragging it back down.

Should it break below again tomorrow, the next support zone is 2070 then 2060. Personally I don’t think it will go much lower now, but I don’t trade my opinions, I only trade price, and price is telling me via the trading system that it is time to reduce risk and wait and see.

The S&P is vulnerable, but lets see if this is just a retracement for the next leg higher. If it’s not, then I will most likely be out for a couple of weeks searching for a bottom. I am just convinced that there must be another higher high before we will see a bigger multiday correction.

Market News

U.S. stocks closed about 1 percent lower on Tuesday as investors eyed higher bond yields, mixed domestic data and renewed concerns over Greece.

The major averages failed to hold above psychologically key levels. The Dow Jones industrial average closed below 18,000, off 142 points after an earlier decline of more than 150 points.

The Nasdaq underperformed, falling about 1.5 percent to close below 5,000. The iShares Nasdaq Biotechnology ETF (IBB) fell more than 2 percent. Apple was the worst-performing blue chip, while other tech giants Microsoft and Google also declined sharply. The S&P 500 failed to stay above the key 2,100 level.

The Russell 2000 fell more than 1.5 percent, giving back recent gains to trade near last Thursday’s lows and up less than 1 percent for the year. The index of small-cap, domestically-focused firms had hit records with the strengthening dollar.

The Dow transports closed down 1.5 percent, with oil settling above $60 a barrel for the first time since December 2014.

European equities closed sharply lower on Tuesday as investors weighed Greece news despite good earnings from banking giants HSBC and UBS.

In the continuing Greek debt drama, stocks and bonds sold off in Athens on news the International Monetary Fund may cut a funding lifeline to Greece unless its European partners accept more debt write-downs, the Financial Times reported. Germany’s finance minister later rebuffed the report.

Data for the second quarter has been more encouraging. April’s non-manufacturing ISM hit a five-month high, coming in at 57.8 versus the expected 56.3 and March’s 56.5.

The pace of expansion in the U.S. services sector eased from a seven-month high in April on a dip in new business growth, but hiring in the sector accelerated to its highest since June, Financial firm Markit said.

Chinese shares plummeted amid reports of brokerages raising margin requirements and news that the Reserve Bank of Australia cut interest rates for the second time this year.


Earnings: Tesla Motors, Marathon Oil, Sunoco Logistics, Transocean, TripAdvisor, A-B InBev, GlaxoSmithKline, Occidental Petroleum, Chesapeake Energy, HollyFrontier, Motorola Solutions, 3D Systems, SodaStream, Wendy’s, Activision Blizzard, 21st Century Fox, Keurig Green Mountain, WholeFoods, Rayonier , WebMd

7:30 a.m.: Mortgage applications

8:15 a.m.: ADP private payrolls

8:30 a.m.: Productivity and costs

9:15 a.m.: Fed Chair Janet Yellen and IMF MD Christine Lagarde on panel

10:30 a.m.: DOE oil, gasoline inventories

1:15 p.m.: Kansas City Fed’s Esther George on credit markets panel

1:30 p.m.: Atlanta Fed Dennis Lockhart on monetary policy

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