The Bull/Bear battleground.

The Bulls have been impressive rallying back up to test market highs however they seemed to lose considerable energy near the close.  With the futures looking lower this morning the Bears are showing their teeth and willingness to fight.  With definitive support and resistance levels on the DIA, SPY, and QQQ’s the Bull/Bear battleground as been established.  I suggest staying very focused on price action.  Trend and momentum currently favor the Bulls, but last week we saw how quickly that edge could fade away.  I am raising my caution levels and will restrict my market activity.  No matter which team wins this battle I will be ready to ride their coat tails when price action clues of the winner begin to emerge.

On the Calendar

The Economic Calendar for Thursday begins with the weekly Jobless Claims at 8:30 AM Eastern.  Labor continues to hold very strong this year, and forecasters see that continuing with a 240K print today.  Also at 8:30 AM is the Philly Fed Business Survey.  The July report only showed marginal strength at 19.5 vs. the 17.0 consensus for today.  At 9:30 AM we get a reading on Industrial Production which is expected to rise 0.3% with capacity utilization edging up to 76.7%.  Other than that we have Fed speakers at 1:00 and 1:45 PM and few non-market-moving reports mixed in for good measure.

There are just over 50 companies reporting earning today, so please stay on your toes checking your holding and those you are considering for new trades.  A couple to make a note of are the reports from BABA and WMT which both happen before the bell today.

Action Plan

Before the FOMC Minutes, the market was finally seeing some follow-through buying after the morning futures pump.  However, after the report, weakness showed up in the indexes selling off to near the opening prints.   The DIA, SPY, and QQQ’s all remained under resistance leaving behind indecisive candle patterns once again opening the door for reversal.  Currently, futures are pointing to a slightly lower open that require our attention.  If it turns out to only be a rest near the highs, perfect, but if the Bears go to work here then trouble could be just around the corner.

Over all the trend continues to be up but I think it’s wise to raise your caution level as we dance around the market highs.  Reversals can happen very quickly near market highs, and although 3 of 4 major indexes are holding up well, IWM is down-trending raising some questions.  As a result, I will likely curtail my trading activity slightly and will be prepared to take profits ahead of the weekend.

Trade Wisely,

Doug