High Volatility and Challenging Summer Trading Likely Lies Ahead

Yesterday likely marked the beginning of challenging summer trading with high volatility tossed in for goo measure.  As a general, rule summer markets are difficult to trade with lots of choppy price action.  As it turns out, summer seems to have come late this year dispelling the old saying, sell in May and stay away.   The other challenge we could face is that the market may be a significant market high.  A correction that many would say is way overdue.  Let’s avoid all the predicting and just focus on price action because the clues will be there if we are unbiased.  Also, remember that a market pullback is not a personal attack on you so don’t fight it.  Think of a correction as a Mega Sale at your favorite store where we could get the chance of getting much better deals on quality products.

On the Calendar

The last trading day in June the Economic Calendar only has three items of concern.  We start off at 8:30 AM Eastern with the biggest number of the day, Personal Income, and Outlays.   The consumer is expected to slow down in May as is the personal income however consensus suggests that food and energy will rise.  Thus, the overall number is expected to come in unchanged at 1.5%.  At 9:45 we get a reading on the Chicago PMI which has been steadily increasing the last four months to 59.4 but the forecast for today indicates a pullback to 58.2.  Last but not least we get a reading on Consumer Sentiment at 10:00 AM which fell back 2.6 points in May to 94.5.   Consensus suggests it will hold stable at that number for June.

The Earnings Calendar is giving us a break today with only two companies reporting, EROS and OSN.  A big winner after the bell yesterday was NKE.  It will be nice if this old friend of mine gets back in a trend because it has proved to be an excellent money maker in the past.

Action Plan

Yesterday was an ugly day for the market breaking support levels and creating significant technical damage to the index charts.  The end of day rally was a sweet relief and with the futures pointing to a gap up open some of the bearish pressure will be released.  Just remember V-bottoms are rare and we should expect yesterday’s lows to see a retest in the near future.   We will now have to tune into possible failure patterns at or near resistance.

Today my plan is to take the day off!  We can expect after the morning rush to see volumes drop off quickly as may traders will be starting the 4^th of July Holiday early.  I will also not be trading on Monday.  Tuesday the market is closed, but I will be back in the saddle Wednesday morning rested and ready for the challenges of summer trading.

Trade Wisely,

Doug