Sweet Relief

What a great relief to see the bulls stepping up the plate once again.  Just when it seems safe to jump in both feet keep in mind just how much the market has rallied.  The Dow is now up now more than 1400 points since it’s low on April 2^nd and is approaching a significant resistance level.  Strong earnings reports can and may continue to spur the bulls higher, but it would be wise to prepare for the possibility pullback or consolidation.

A major problem that plagued me years was failing to give proper respect to price resistance.  I would wait for so much confirmation that a stock or index was moving up that I was normally buying at or near price resistance.  As a result, I would often get punished wasting not only capital but also crushing my trading confidence.  If you currently suffer the same problem the fix is easy.  Learn to buy when prices are reacting to price supports.  Your win/loss ratio should improve and when you do get stopped our losses will typically be smaller.

On the Calendar

We have two potentially market-moving reports this Wednesday on the Economic Calendar.  Today Fed member, William Dudley, speaks at 8:30 AM and at 3:15 PM today.  The EIA Petroleum Status report is at 10:30 AM.  They don’t forward forecast petroleum supplies, but the last reading showed a slight increase in supplies.  The Beige Book comes out at 2:00 PM which is used by the FOMC as part of the decision making process on interest rates.  Any indication of inflationary pressures rising could cause markets to react negatively.  Winding up the calendar day at 4:15 PM is another Fed Speaker, Randal Queries.

The Earnings Calendar is picking up speed with 75 companies expected to fess up to their results today.  Before the bell, we will hear from MS, ABT, and USB.  After the bell AA, KMI, URI, and AXP are few of those slated to report.

Action Plan

After the morning gap, the indexes continued slowly pushing higher putting pressure on those holding short positions.  The DIA slipped into an intraday consolidation while QQQ powered higher inspired by strong earnings reports.  The good news is that all four of the major indexes closed above their 50-day averages and the current futures are showing some follow-through bullishness at the open today.

As good as that is there are still many challenges of resistance overhead, and we are starting to show a few signals of stress having moved so far so fast.  I would not be surprised to see a little resting consolidation or profit taking pullback to begin at any time.  Please understand I’m not suggesting bearishness, in fact, strong earnings could continue to inspire the bulls to keep pushing upward.  As always choose stocks that are reacting to price supports and tends and be cautious of those at or near price resistance levels.

Trade Wisely,

Doug