Plan for an extra dose of volatility.

With hundreds of earnings reports today and the FOMC announcement, we can likely expect volatility to kick up a notch.  Extra volatility should not be feared, but every trader should have a plan in place to deal with it unemotionally.  Please, Please, PLEASE make sure you are checking earnings dates on all stocks.  As an example take a look at AKAM.  AKAM had a beautiful entry signal at the end of the day.  I would normally have bought the stock in a hot minute but checking earnings I discovered it was about to report.  Thankfully I checked because the stock is gapping down almost 8% this morning!  That few seconds likely saved me hundreds of dollars.  Defentally worth the effort!  With VIX so low there are many traders beginning to speculate the market is overbought.  That could be true but trying to predict a top is a very difficult business that normally costs those that do a lot of capital.  If you’re concerned about a market top, lock in profits and reduce trading activity.  The market will tell us where it wants to go if we just wait and watch rather than predict.

On the Calendar

Hump day on the Economic Calendar begins with New Home Sales at 10:00 AM Eastern.  Forecasters see home sales increased slightly to 611k consensus in June.  Then at 10:30 AM we will get the EIA Petroleum Status Report.  Oil supply levels have been trending lower in the EIA report, and continued reductions are very important to stabilize the commodity prices.  Then at 2:00 PM is the all important FOMC Announcement on interest rates.  The market is not expecting a rate increase today but keep in mind that all they have to do is change a word or two in their statement to move the market dramatically.

On the Earnings Calendar, there are 275 companies reporting results today.  As of now, earnings have pushed the market sharply higher with no fear.  Nevertheless, it is extremely important for every trader to find out when the companies they hold are reporting.

Action Plan

Overall we saw the indexes held up pretty well yesterday, but the price action was rather subdued as the market waits to hear from the FOMC.  The bullish trend is still is still in place on a daily and the weekly charts.  The best practice is to continue trading with the trend.

The trend is still up, so I will continue to look for long trades. However, I will be slow to enter new risk at this point in the rally.  Although I have pickup some new trades, I have also been reducing overall risk taking profits on several positions already this week.  My inclination is to continue to reduce risk as market extends this rally.  Currently, futures are pointing to a small gap up open but keep in mind trading will today will not only be affected by hundreds or earnings reports but also the FOMC announcement.

Trade Wisely,

Doug