The market has seen a return to Risk Off activity as the last few headlines on China trade have been negative. But really, we are just exploring the bottom of a trading range awaiting the outcome from the next round of talks October 10^th.

This means stocks will be in limbo land for the time being. We will discuss some trading strategies for this period before talks commence and then ponder what comes next.

Limbo Land Strategy

Let’s first define the trading range that seems to be forming. The top end is the previous highs of 3028. The bottom end seems to align with the 50 day moving average at 2948 which provided ample support for stocks on Friday.

Yes, it is possible to explore a touch higher or lower, especially if new headlines emerge that change the calculus on a deal coming together. But this nearly 3% range seems to give stocks a natural resting place coming into the next round of negotiations.

The active traders out there should appreciate that if we are currently near the bottom end of the range, then it says to buy this dip for a likely bounce higher. Just remember this is a short term play to lock in some quick profits as they may not be on the board for long.

Mid to long term investors should take a pass on what I shared above. Instead you should just make sure to align your portfolio with the risk/reward of what happens with the upcoming trade talks.

On the one hand, a negative end to talks = immediate 5-10% sell off in stocks (as we saw back in August). And on the other hand, the positive conclusion would likely have stocks sprinting to a new high around 3100.

Yes, that is a wide range of outcomes. You just have to decide how aggressive or conservative you want to be into that announcement.

My Recommendation

As shared last week, I like to find a balance between the best and worst case scenarios. This way you are never caught off guard. And from that position it is easier to get more defensive or more aggressive depending on how things unfold.

My reading of the tea leaves has me at 70% long the stock market at this time. This includes 10 stocks, 1 long ETF and 2 inverse ETFs found inside the Reitmeister Total Return portfolio.

Yes, many of the stocks are your typical aggressive growth and value plays. Including a few under the radar small cap plays with exceptional upside potential.

But I also have a healthy serving of conservative income producing stocks that provide a smoother ride to outperformance. They are especially helpful to steady the portfolio during those nasty Risk Off sessions.

Lastly, I believe in owning some inverse ETFs now as downside insurance policies in case this deal falls apart. And gladly they have rallied a great deal over the past week as the market has quickly retreated to the bottom end of the range.

If this strategy makes sense to you, then I invite you to explore the Reitmeister Total Return portfolio. Gladly we offer a 30 day trial.

This trial gives you access to the current portfolio of 10 stocks and 3 ETFs. Plus your 30 day trial would cover the mid October trade negotiations. You won’t want to miss any of the timely trade alerts to get you in the best position following this pivotal event.

Start 30 Day Trial to Reitmeister Total Return portfolio

Wishing you a world of investment success!

Steve Reitmeister

…but my friends call me Reity (pronounced “Righty”)
CEO, Stock News Network

Editor, Reitmeister Total Return

SPY shares were trading at $295.53 per share on Friday afternoon, down $1.47 (-0.49%). Year-to-date, SPY has gained 19.90%, versus a 19.90% rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...

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