Bulls Step Up

After the gap down open it was nice to see the Bulls step up.   They left behind bullish candles in the DIA, SPY, and QQQ.  A very good sign but now it’s critical they follow-through to confirm.  After the morning rally, the bullishness seemed to die on the vine with light volume chop dominating the rest of the day.  A Concern? Maybe.  The VIX also seems to register a concern with a slightly higher close yesterday.

There is certainly no reason to panic.  As of now the trends in the market continue to be bullish. However, there is also a reason not to be complacent.  Plan your trades carefully and be diligent with your trade management.  Take some profits into strength and carefully manage stop loss orders.  Avoid over trading and make sure your trades are sized correctly to your risk tolerance.  Of course, this is a good course of action at all times saving your hard-earned capital and reducing emotional trading in the heat of the moment.

On the Calendar

Today on the Economic Calendar there are 2 Fed members and Janet Yellen speaking even before the market opens.  Such an ambitious group.  At 8:30 AM Eastern is the PPI-FD report.  For, October, forecasters are expecting a core 0.1% increase vs. the September increase of 0.4%.  Remove food and energy, and the number is 0.2% and remains the same with trade services excluded.

Today marks the last really big day of this earnings season.  There are 290 companies set to step up and report today.  HD, TJX, BZH, LMT & MBT are reporting just to name a few.  There are still a lot more earnings to come, but they roll out a  much slower pace going forward.

Action Plan

The DIA, SPY, and QQQ had a much better day with the Bulls stepping up after the gap down open and producing bullish engulfing candle patterns.  That is a very good sign but keep in mind; price must follow-through today to confirm.  Currently, futures are flat to slightly lower but with the PPI report and so many earnings reports that could easily change.

Currently, the trend is higher except for the poor IWM which just can’t seem to get its act together.  In the past, IWM has served as an early warning to future market direction.  I would never trade based on that signal but is a reminder not to become complacent in trade planning and risk management.  As good as yesterday was take note that the VIX didn’t respond by moving sharply lower but made a small gain.  Higher volatility can lead to quick reversals and challenging price action.

Trade Wisley,

Doug