Big Decision lies Ahead

A big decision lies ahead for the market.  Currently, the indexes seem stuck between a rock and a hard place with moving averages trying to provide support and significant overhead price resistance trying to hold them down.  Currently the bulls the and bears seem somewhat equally balanced, and both sides appear to be waiting for inspiration.  With around 800 companies expected to report earnings next week, they may find the catalyst to needed to make a decision.

The big question is who will gain the upper hand, the bulls or the bears?  As we saw yesterday, just the hint that AAPL could miss on sales expectations sent the stock sharply lower.  It obviously wouldn’t take much to embolden the bears producing another lower high in the index.  However, if the earnings can continue to come in strong, it may provide the energy required to finally break-through resistance levels.  As short-term traders, we must prepare for both possibilities just in case that big decision occurs next week.

On the Calendar

We have a very light Friday Economic Calendar with no market-moving reports.  We have Fed speakers at 9:40 AM and 11:15 AM as well as the Baker-Hughes Rig Count at 1:00 PM to finish the day.

We also have a light day on the Earnings Calendar with only 25 companies expected to report.  Among them CFC, CLF, GE, and HON.

Action Plan

We saw a bit more selling then I was hoping for yesterday, but at the end of the day, the bulls did make an effort to defend price supports.  There was some significant pressure in the tech sector as AAPL sold off sharply on worries the company with fall considerably short of sales expectations.  The fear of slowing mobile demand put pressure on the entire tech sector yesterday with the QQQ testing it’s 50-day average.  The good news is the selling did not seem to ruffle market fears with the VIX showing very little interest in moving yesterday.  Currently, the Dow Futures are suggesting a relatively flat open but as earnings come out this morning that could certainly change quickly.

I still think the market wants to take a little rest around the 50-day averages as we head into the weekend.  Next week is a big week for earnings reports, and perhaps that will provide some directional inspiration.  Some strong reports could provide just enough energy to the bull to attack overhead resistance.  On the other have if earnings disappoint the bears could produce another lower high in the indexes and fail to hold the moving average support.  Although I hope the bulls will prevail, I know that I must also prepare in the event the bears gain the upper hand.  Consider that as you plan your risk heading into the weekend.

Trade Wisely,

Doug