Bears say, Howdy.

With everyone was enjoying a long weekend it would appear this morning the bears want to say howdy and mount an offensive.  The normal culprit, US political uncertainty, does not seem to be the cause of the bearish move it seems to stem this morning from our friends across the pond.  European indexes are lower with another extension request on the Brexit as a possible culprit.

Nonetheless, the Futures are pointing to a substantial gap down of more than 150 Dow points breaking below the consolidations support and adding another possible resistance level.  With the DIA and SPY now so close to their 50-day averages a test of this key level now appears more likely.  There is no need to panic, but there is a reason to raise your caution level.  As always stay focused on price action and remain disciplined to your rules rather than letting emotion dictate business decisions.

On the Calendar

Although it’s only a four day work week, the Economic Calendar will be a busy one with a bunch of potential market-moving reports.  Today we get things kicked off at 9:00 AM CoreLogic Case-Shiller as forecasters expect a slight decline to 6.4% vs. the February reading of 6.8%.  At 10:00 AM the Consumer Confidence will remain strong according to forecasters that expect May to come in at 128.1 holding on to this year’s gains.  After that, we have State Street Investor Confidence at 10:00 AM, Dallas Fed Mfg Survey, and 3-bond auctions to round out the calendar day.

On the Earnings Calendar among the 51 companies, a room favorite of late MOMO will report before the bell today.  After the market close, we will hear form HPQ & CRM.

Action Plan

It was not a surprise to see Friday’s price action so anemic and choppy.  Unfortunately, it also gave us no clues the big gap down open we currently see this morning.  Currently, the Dow Futures suggest a gap down of more than 150 points following declines in European markets during the night.  If the bearishness holds through-out the morning the DIA, SPY will gap below last Thursdays low and the consolidations price support.  The IWM is currently indicated to open below the support of the breakout to new highs created on the 16^th.

If there is a silver lining this morning, it’s the fact that all the major indexes currently remain above their respective 50-day averages and are at this time still holding onto the up-trend.  With such a violent move at the open, it’s easy to make poor emotionally based snap decisions.  As always watch the price action closely and follow your trading plans.  At this point, a test of the 50-day seems likely; the big question is will this key level hold?

Trade Wisely,

Doug