The Bulls are back in town.

After a tough battle at price resistance in the morning, the Bulls finally gained the upper hand about midday.  Resistance levels and even some down trend levels gave way.  We can now officially say the Bulls are back in town and at least for now seem to be in control.  Historically August and September are tough months in the market, but there has been nothing typical about this year.  As normal I will caution you about chasing the morning gap, but it now looks to me that new record market highs are possible in very near future.  The massive damage in Houston what I assume create productivity losses and likely rising jobless claims, but this currently is being completely ignored by the market.  That may be a little shocking but not all that surprising with the wildly bullish nature this market has displayed.  The VIX is once again showing a remarkable lack of fear or as some might suggest complacency.  Enjoy it and profit from it just don’t be lulled to sleep by it.

On the Calendar

We begin today’s Economic Calendar with the weekly Jobless Claims at 8:30 AM Eastern.  Claims have held steady at historic lows this summer, and forecasters see that continuing but up slightly to 237K.  Also at 8:30 AM we get a reading on the Personal Income and Outlays which was weak in June.  However, the consensus is expecting an increase of 0.4% in both income and spending today.  At 9:45 is the Chicago PMI which pulled back slightly from a 3-year high in July.  August consensus is expecting another slight decline to 58.6 which is still very strong overall on order and backlogs.  At 10:00 is Pending Home Sales which forecasters see rising 0.4% from the July number.

There are more than 50 companies on the Earnings Calendar expected to report results today.  Retail seems to be a theme today with DG, LE, LULU, and BEBE on the schedule.  Also reporting today is big blue chipper CPB.

Action Plan

Yesterday the market seemed to struggle until about midday when the Bulls finally began to over run the Bears at resistance.  Not only did the Bears give up resistance levels but by the end of the day, even some of the down trend levels gave way to the buying.  We are not completely out of the woods with more resistance levels above, but Bulls seem to have regained control of market direction.  This morning the Dow Futures are pointing at least a 50 point gap up.  As always a will caution you about chasing a gap when we are at or near market highs.  It’s the perfect place to find whipsaw price action and set Bull traps.  Wait to see if there is follow through buying before adding new risk.

Currently, we are in some great positions with 70% gains in X, 50% gains in TECK, very nice profits in the BRKB.  We are holding small gains in FCX, and GRUB.  Even our new position in MSFT closed the day with gains.  As we head into the weekend, don’t forget to take some profits.  Selling into strength is a trait of consistently profitable traders.  Don’t allow greed to prevent you from getting paid for your hard work.  As long as this morning gap holds, I will be looking for new long positions entries but protecting current gains will be at the top of my list of priorities.

Trade Wisely,

Doug