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On the surface, trading volume is down and the summer doldrums are here. But don’t be fooled. A big move is setting up. You can see it in the steady squeezing of the Bollinger Bands around the NYSE Advance Decline Line (NYAD), the S&P 500 Index (SPX), and the 10-year Treasury yield, observes Joe Duarte, editor of Joe’s Weekender Portfolio.

Underlying expectations of Federal Reserve rate cuts and a rise in liquidity could explain the recent steadiness of the stock market, as in the NYAD and the SPX holding above 5,850. The fly in the ointment is what it’s been for the past seven months – the Washington fiscal/political games and the increasingly perilous geopolitical situation.

From a trading standpoint it pays to be ready for just about anything. Here are some useful rules:

• Be ready for a big move – up or down
• Stay calm and focused
• Follow the status of the market’s liquidity closely
• Keep abreast of the market’s sentiment
• Consider taking profits on positions that are extended and thus vulnerable to profit taking
• If a position is stopped out, move on

Meanwhile, there is one important sector ETF to monitor as the current situation unfolds – the VanEck Semiconductor ETF (SMH).

The SMH ETF is the central cog in technology. It has remained resilient - thus far. The ETF has remained above the 20-day and 200-day moving averages. A more bullish view is that the fund has found support at the $260 level.

About the Author

Dr. Joe Duarte is an active trader and widely recognized stock market analyst since 1987. He is author of Trading Options for Dummies, rated a top options book for 2018 and 2019 by benzinga.com—now in its third edition, and The Everything Investing in your 20s and 30s, a Washington Post Color of Money Book of the Month. An original CNBC Market Maven, his articles appear on moneyshow.com weekly.

He has written for Personal Finance, Investing Daily, and has been quoted in Barron's, The Wall Street Journal, The Washington Post, Marketwatch.com , Yahoo Finance, and many others. His other books include Trading Options for Dummies, Trading Futures for Dummies, and Market Timing for Dummies.

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