Bullishness or complacency.  You decide.

Do you believe the market is truly bullish or is this complacency?  The Bulls have done a remarkable job in this rally but do they have the energy to break through resistance?  The VIX suggests there is virtually no fear in this market.  Could it be complacency?  If I knew the answer to that, I would soon be very rich!  Sadly I’m not able to see a future outcome. Thus I have to be prepared for anything.  We have a three day weekend ahead of us, and in my opinion, uncertainty abounds.  Have a plan.  Don’t be like sheep, blindly strolling into danger just because others might be doing so.  My recommendation is to be very cautious right now.

On the Calendar

Wednesday’s Economic Calendar starts off with Existing Home Sales at 10:00 AM Eastern.  Home prices have been rising and days on the market have been falling this year.  The numbers would suggest the economy is strong but also hints of inflationary factors heating up.  At 10:30 we have the Petroleum Status Report.  Efforts to lower supplies seem to have finally started to work, however, if there is an increase we can expect a negative market effect.

The big news of the day will be the FOMC minutes at 2:00 PM.  With Fed members speaking almost every day I can’t imagine we will learn anything new, but they will make a drama out of it never the less.  CNBC will play their most dramatic bumper music, and the talking heads will ramp up the emotion before and after the release.

Action Plan

You may have missed it, but there were some big news events overnight.  The most important; Moody’s downgrade the credit rating of China do to their rapidly growing and massive debt.  As of now, the markets have shrugged it off as if nothing happened.  Personally, I think this is another clue of complacency and maybe a warning of troubles ahead.

I recommended caution yesterday and maintain the same stance today.  A long as the market continues to test price resistance but shows the inability to breakthrough it I will remain cautious.  For me, that means I will continue to trade long but will limit the number and size of my trades.  I will be very picky on the trades I take and will have exit plans ready to execute on any clues of failure.  Go Bulls!

Trade Wisely,

Doug