Defend Price Support

In yesterdays morning video I mentioned that it was going to very important for the Bulls to defend price support.  After a nail-biting dip below support to strip out tight stop-loss orders; the Bulls began to stand their ground and push back.  As always the important thing now is that they follow-through with a push higher and close the day above yesterdays high.  A failure to do will embolden the Bears and keep the current downtrend intact.  With a strong enough effort by the Bulls, a short squeeze could trigger if there are enough early short-hands betting against the market.

On the Calendar

Thursday’s Economic Calendar begins with three reports at 8:30 AM Eastern time.  The Weekly Jobless Claims consensus is for a reading 236K vs. the 239k last week.  Puerto Rico, however, remains a bit of wildcard on the jobless front.   The Philly Fed Mfg Index is expected to report 25.0 for November vs. the 27.9 October print.  The consensus for October Import prices is 0.4% with export prices expected at 0.1%.  At 9:15 AM forecasters are calling for 0.5% gain in Industrial Production for October with manufacturing production expected to increase by 0.3%.  Overall capacity utilization is seen rising to 76.3%.  The Housing Market Index at 10:00 AM is forecast to see November at 67 vs. the October 68 reading.

We have three Fed Speakers on the calendar today speaking at 9:15 AM, 1:10 PM, and 3:45 PM.  On the Earnings Calendar, we have just over 70 companies expected to report today.  Before the bell, we will hear from HP, SPLS & WMT and after the bell ROST, POST & GPS are just a few notables fessing up.

Action Plan

Yesterday saw the Bulls do a pretty good job of defending support levels on the DIA, SPY, and QQQs.  Unfortunately, the Bulls lacked the strength and motivation to fill the morning gap.  As of right now, the Dow Futures are suggesting a gap up of about 40 points but this earnings reports and a heavily laden Economic Calendar that could easily change.

As for me, I plan to continue exercising caution on new positions until I see the current short-term downtrend broken to the upside.  Of course, I will closely monitor current positions and prepared to take some profits as we move toward the weekend.  Remember volatility has increased so keep in mind fast intra-day swings are possible.  I’m guessing this week has produced a significant number of short sellers.  If the Bulls have the strength, this would be a very good place to trigger a short squeeze.  On the other hand, if the Bears maintain control, a failure here could create a rush for the doors.  I guess what I’m saying is be prepared for anything.

Trade Wisely,

Doug