The Humbling Market

The market has a way of humbling us all.  Yesterday I suggested we would likely see a big gap up or a big gap down as a result of AAPL earnings.  AAPL produced great earnings, sales, guidance and huge stock repurchase program after the bell yesterday.  The stock currently is gaping up 4% in the premarket and all-though the Dow Futures are pointing to a gap up open it’s not what I would call a big gap.  Although I still think I was right to be cautious ahead of such big focused event, it wrong of me to try and predict how the market would react.  A lesson that has repeatedly humbled me over the last 28 years of trading.

As always it’s the big institutions with their trillions of dollars that will decide the direction of a stock and the overall market.  Our job as retail traders is to identify the clues they leave behind in price action and follow their lead rather than trying to predict the future.  It’s far less stressful and much easier to build consistency into your trading when we remain humble and simply follow price action.

On the Calendar

Today’s Economic Calander have three potential market-moving reports.  First, the ADP Employment report at 8:15 AM Eastern is estimating the economy created 191,000 new jobs in April.  The unforecast Petroleum Statis report at 10:30 AM has shown the US supplies declining of late helping to support oil prices.  Then at 2:00 PM is the biggest event of the day occurs when the FOMC releases their decision on interest rates.  Other than that we have a couple of reports and three bond events all of which are not expected to move the market.

Another big day on the Earnings Calendar with nearly 350 companies reporting results.  Stay on your toes.

Action Plan

AAPL does it once again releasing considerable pressure in the tech sector topping estimates and selling more than 52 million iPhone’s last quarter.  They also announce an additional 100 billion in stock repurchases to put a cherry on top for investors.  The question is, with this giant weight lifted, can the tech sector stocks get moving in response to so many strong earnings reports?  Only time will tell.

Now we move on to the FOMC rate decision at 2:00 PM.  After the morning rush, it’s pretty normal for the market to become slow and choppy as we wait for their announcement.  Expect extremely fast price action on the release of the decision which often delivers several whipsaws before finally establishing a direction.  Currently, the Fed Funds Futures place about a 95% chance of a rate increase of 25 basis points today.  The big question is will the statement become move toward the hawkish side now that the Economic targets established by the FOMC have been achieved?

Trade Wisely,

Doug