A mistake often made.

As we head into Christmas and the New Year, I feel compelled to remind you that not every day is a good day to trade.  A mistake often made by short-term traders is thinking they have traded just because they happen to be sitting in front of their computers.  It’s a painful lesson I learned the hard way.  There are times to trade aggressively, and there are times that it’s much wiser just to stand aside.  Quality of trades is far more important than quantity of trades.  I know it seems sounds cliché’, but less is quite often more.  Market volume is likely to remain sub-par between now and the first of the year.  If you do decide to trade, make sure you have a well thought out plan and are willing to endure a lot of choppy price action.

On the Calendar

Today the Economic calendar is overflowing with reports but only three that have the power to move the market.  First at 8:30 AM, is the very important GDP number.  Consensus says the overall number will stay unchanged at 2.1 % with consumer spending remaining unchanged as well.  Weekly Jobless claims which are also at 8:30 AM are expected to come in at 234K a slight decline of 1000 from last week.  Then we get the Philly Fed Business Outlook, also at 8:30.  Consensus for December has the outlook coming in with a slight decline at 21.8 backing way from a 48-year high.

On the Earnings Calendar, we have just over 20 companies reporting today some that could have a market impact.  Noteables before the bell are CAG, KMX, RAD, and PAYX.  After the bell, we will hear from CTAS, NKE, and CAMP.

Action Plan

Sellers were quick to respond the yesterdays 100-point-gap with profit taking.  After reaching price support level in just a few minutes after the open volume died on the vine and we slipped into choppy action.  As of now, there is no technical damage to the overall trends, but there is certainly reason to elevate caution.  Dow futures are currently pointing to a slight gap up open but keep in mind that could quickly change.  We have 3-important economic reports and some earnings that could easily make the open better or worse in the blink of an eye.

As for me, heading into a long holiday weekend, I plan to avoid adding any additional risk.  Anything can happen over long weekends, so I’m more likely to seek the security of being in cash.  Of course, I’m only talking about short-term holdings; with long-term trades, I will stay the course.  After the morning rush, I expect volumes to diminish quickly.   Choppy directionless price action could easily dominate the majority of the day.  With the new year only a few days away it just seems foolish to risk giving back the any of the fantastic profits in a low volume market.

Trade Wisely,

Doug