A huge week of market events.

With seven potential market-moving economic reports and well over 1000 earnings reports, this is a huge week of events.  For new or inexperienced traders, weeks like this can be very challenging because volatility can suddenly shift market direction.  For the most part, I avoid earnings reports like the plague.  No matter how good a company may seem to play the earnings report is dangerous.  All of your technical analysis skills are useless because anything is possible when a company reports.

Times of volatility will also test your greed emotion to the max.  When your right on the direction and the stock move quickly in your direction, it’s wise to consider scaling out of the trade or exiting it all together.  Stock and quickly shift when there is so much news rolling out.  Also, remember gaps are gifts and a great time to go to the bank with at part or all of the position.  Don’t allow greet to prevent you taking a profit.

On the Calendar

The Economic Calendar starts off slow but has several very important reports during the week and finishes up with the market moving GDP numbers.  At 8:30 AM this morning we get the Chicago Fed National Activity Index.  It’s very unlikely to move the market, and I only mention it because other than that all we have is some bond auctions to round out the day.

The Earnings Calendar ramps up this week is likely to create some volatility as big newsy reports roll out.  Please keep in mind big market gap up’s and gap downs are common so plan your risk carefully.  Today is the lightest day on the calendar with just short of 80 earnings reports.

Action Plan

Having taken several trades off last Friday, we enter the market today light in our accounts.  Considering how stretched the market is I’m comfortable having less risk.  The futures are of course pushing for a higher open with the Dow right now showing a 20-point gap up.  Just like on Friday don’t be surprised to see whipsaw price action after the open.

I plan to give the market 15 to 30 minutes after the open to see there are real buyers interested at these levels before looking for new trades.  If the earnings reports continue to roll our positive, there is every reason to believe the market could still move higher.  I know logic says this rally can’t continue forever, but those that predict can easily get run over just like the those that got short last Thursday morning.  Stay with the trend until price tells you differently.

Trade Wisely,

Doug