7th Straight DIA Record
After the FOMC volatility, the Bulls demonstrated tremendous strength setting the 7th straight DIA record. Equally amazing is that SPY and QQQ’s remain stuck in choppy consolidations while the DIA does all the work. As a result of yesterdays price action, there is a slight concern in the candle pattern that I describe in the Action Plan section of this post. The DIA is clearly leading the overall market, but we will soon need to see the SPY and QQQ’s start to participate. The IWM has made an impressive comeback, but it will be important to see how it deals with the resistance high. As you know, I love taking profits into strength. With the weekend nearing I will be thinking about banking some gains especially if the market begins to display any weakness over the next couple days.
On the Calendar
The Thursday Economic Calendar kicks off at 8:30 AM Eastern with the Weekly Jobless Claims. Due to the impacts of hurricane season, consensus expects claims to increase to 303k today. Also at 8:30 is the Philly Fed Bus. Outlook Survey which is expected to remain extremely strong with an 18.0 reading this month. After that, we have lesser reports which are unlikely to move the market such as Housing Price Index and Leading Indicators. The remainder of the calendar consists of bond announcements and auctions.
There are just over 20 companies reporting on the Earnings Calendar today. Looking through the list, I don’t see any market-moving reports.
Action Plan
Yesterday I suggested we could see choppy price action ahead of the FOMC and violent price action after. That turned out to be pretty much spot on, but even I was surprised by the violence of the post-announcement price action. Ultimately the Bulls won the day with the Dow with it 7th record-breaking high in as many days. Unfortuinatually the SPY, QQQ’s and IWM were unable to break out. With the DIA leading the way and its 9th day up it left behind a possible Hanging Man Candle Pattern. I used the word possible because would need a followthrough day to the downside to confirm the signal. No, follow through, and the candle is just a day of wild price action. The SPY and the QQQ are also left behind problematic daily candles if today happens to be a down day.
Currently, Dow futures are pointing to a flat to ever so slightly lower open. With the market ups so strongly I will have a focus on taking some profits particularly if some weakness develops. We are currently holding some very nice gains, and the last thing we want to do is allow the market to take them away. Guard against chasing into trades with the market so stretched on the back of the Dow alone. Only consider entering trades with low-risk at or very near price support levels.
Trade Wisely,
Doug
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