SPY opens its 17^th day inside a 3 point chop zone.

At the close of Friday, there were bullish signals popping all over the place with when the Bulls began to push the last 30 minutes of the trading day.  However, the futures popping inspiring the emotion to chase let’s keep in mind that the SPY even with a gap up open will still be within the same 3 point range it has chopped in for 17 days.  Could this be the bullish move that breaks us out?  Yes, but it could also be just another setup for a whipsaw.  Try to avoid the urge to chase and closely watch the price action.  Wait for clues that real buyers are stepping in after the open and keep in mind that the SPY will still be trading near the upper resistance of the chop zone.

On the Calendar

We get the last trading week in June kicked off with the Durable Goods Orders at 8:30 AM Eastern time.  Goods orders have only managed a produce a 1/10^th monthly growth this year.  The April reading marked a monthly decline of 0.7%.  Consensus for May is suggesting another decline of 0.4% although ex-transportation orders may show growth.  Other than that there are a couple of insignificant reports and a few bond auctions to round out the calendar.

On the Earnings Calendar, there are only 14 companies expected to report results today.  Remember this is the last week of the 2^nd quarter, so we will soon be right back into the thick of heavy earnings reports soon.  When planning options trades, it is important to upcoming earnings part of your consideration.

Action Plan

Friday saw another day of indecisive price action but the last hour left us some important clues as the Bulls rushed in at the end of the day.  That bullish action appears to have carried over to the pre-market futures which currently indicate a sharp gap up at the open.  As you know, I am always cautious about gap up opens at or near market highs due to the possibility of whipsaws.  I want to see real buyers stepping in after the open not just the market maker pump that can be nothing more than a trap.

Friday left behind some very good looking bullish chart signals.  Two, in particular, will have my close attention at the open.  WYNN and BSX are both possible trades this morning if they don’t gap up to far and if this futures bullishness translates to buyers stepping into the fray.  Let’s keep in mind that the SPY has chopped in a 3 point range for 17 days.  The expected gap up this morning will still be within this choppy range.  What that means to me, is to avoid the whipped up emotion created by the pre-market futures and stay focused on price action.  There is no reason to rush or chase into the market when all the early blustering opens in the day within the chop zone.

Trade Wisely,

Doug