Morning gaps but no follow-through action.

So far this week the pros have pumped up the premarket in the futures gapping the market higher.  There is nothing wrong with that as long as we see some follow-through buying after the open.  However, the last two days have only seen chop after the open making it frustrating and challenging for most traders.  I have been warning each day to avoid chasing the gap and getting caught up in morning drama.

With the futures pointing to another gap up today, I will risk sounding like a broken record and repeat the same words of caution.  Keep in mind FOMC Minutes come out this afternoon.  It would not be a surprise if the market waits for choppy price action before the report.  After the minutes are released expect an extra dose of volatility with quick whipsaw action.

On the Calendar

We have three potential market moving reports on the Economic Calendar today.  At 8:30 AM Eastern it kicks off with Housing Starts which were weak in both April and May but bounced back in May.  Forecasters expect to see another increase today to 1.225 million annualized rate.  At 10:30 AM we get the EIA Petroleum Status Report.  Last reading broke a downtrend in oil supplies with a surprise build squashing the recovery that had begun in the sector.  Let’s cross our fingers and hope for a decline in supplies today helping to support the overall market.  The always anticipated FOMC Minutes will come out at 2:00 PM.  Normally the market would see light volume and choppy price action ahead of the number, but there is nothing normal about the current market.

On the Earnings Calendar, we have over 40 companies reporting today.  Retailers happen to be in focus with TGT reporting before the open today.

Action Plan

Our all or nothing market continues to gap higher at the open, but so far this week, there has been little to no follow through the rest of the day.  There is movement in some individual stocks but to have a little luck and be very quick to gain much benefit.  Currently, the futures are pointing to yet another gap up, but as now a breakout to new price levels has not occurred.  If you find yourself frustrated, you are not alone!  With out question, current price action has been very challenging with little to no edge for retail traders.

With another professional gap this morning I am once again forced to wait for clues that real buyers are willing to support current prices of the overall market.  The gaps on both Monday and Tuesday were met with chop the rest of the day.  Perhaps today will be different but with the FOMC minutes coming out this afternoon could once again create the conditions for more chop after the gap.  The trend is up so if I do trade it will be long.

Trade Wisely,

Doug