Things that make you say Hmm? 

For those of us that watch price action yesterday left us with more questions than answers.  Clearly, bearish candle patterns were left behind, but the majority of the indexes are still in up-trends.  Things that make you say Hmmm?  As of now, only the QQQ is showing technical damage.  From the candle patterns, most traders would expect a big increase in fear, but the VIX seemed only to yawn in boredom.  There is an abundance of clues to suggest caution but also a sense that anything is still possible.  With weighty decisions still to be made in Congress this week expect the market to be very sensitive to the news cycle.  Plan your risk carefully and continue to watch for violent price moves in reaction to news events.

On the Calendar

We kick off Tuesday’s Economic Calendar with the International Trade Report at 8:30 AM.  Once again the international trade deficit is expected to widen in October.  Forecasters see a 47.4 reading vs. 43.5 in September.  At 9:45 there is PMI services which is not expected to move the market coming in unchanged at 54.7.  Then at 10:00 AM we get the ISM Non-Mfg. Index which posted its highest score of 60.1 in October.  Consensus expects this number to remain very strong only slowing to 59.0 in November.  A couple of bound auctions will round out the rest of calendar.

On the Earnings Calendar, there are 38 companies reporting quarterly results.  Notable are AZO, BMO, and TOL before the bell with PLAY and RH after the bell today.

Action Plan

After opening at new record highs in the DIA, SPY, and IWM profit takers took the gift of the gap and rang the register.  Selling off to fill the gap obviously left behind price action candles suggesting a least a tempory top.  The QQQ’s gave a half-hearted attempt to show bullishness with a gap up, but this index suffered significant technical damage.  Not only did it leave behind a bearish engulfing it also printed a lower high failure.

This morning the Dow Futures are pointing to a gap up while at the same time the Nasdaq Futures suggest a gap down to a new low.  Surprisingly with all the selling yesterday day the VIX didn’t register a groundswell of fear as one would have expected.  The overall trends in DIA, SPY, and IWM are still up despite the bearish price action signals.  So although there are a lot of clues suggesting caution only the QQQ has built a case for bearishness.  Personally, I will be taking a wait and see approach without bias as to direction.  I continue to expect market sensitivity to the D.C news cycle making violent price moves possible.

Trade Wisely,

Doug