Whipsaw rally

A big morning gap down followed by a sharp whipsaw rally closed the day with the indexes testing resistance levels.  It was nice to see the Bulls defend, but the question remains if they have the energy to reclaim this week’s highs.  With trade war rhetoric flying around ahead of the weekend we will have to stay focused on price action and remain flexible.

With so much uncertainty and choppy price action, it’s very easy to get caught up in the drama and find yourself over-trading.  This is the kind of market that can chop a traders account to pieces if you’re not careful and very disciplined to a set of rules.  If you see your accounts grow, then congratulations and keep up the good work.  However, if you see your accounts in decline, then it’s time to stop, and regroup.  Remember doing the same thing over and over and expecting a  different result is the definition of insanity.

On the Calendar

The Friday Economic Calendar gets going with two market-moving reports before the bell at 8:30 AM Eastern.  First, the Employment Situation report which is expected to remain very strong with an increase of 190,000 new jobs.  Consensus says the unemployment rate is 3.9 percent in July with a 0.3 percent gain in hourly earnings with average hours worked at 34.4.  Second, the International Trade report expects the trade deficit in goods to widen slightly to 45.6 billion vs. the May reading of 43.1 billion.  Then at 10:00 AM the ISM Non-Mfg. Index according to consensus will decline to 58.8 but continues to show exceptional strength.  We a PMI Services Index report @ 9:45 and the Baker-Hughes Rig Count @ 1:00 PM to close out a very busy calendar week.

On the Earnings Calendar, the earnings reports slow down with just under 100 companies fessing up to their results.  We have more than 1300 companies reporting next week so keep us on our toes.

Action Plan

After a substantial morning gap down the Bulls charged attempting to shake off trade war jitters and keeping traders off balance with the ship price action.  As good as it was to see the Bulls defend, please keep in mind yesterdays rally let the indexes ver near resistance levels.  Asian markets were mixed last night with European markets all slightly higher.  Currently, the Dow Futures suggest a flat to slightly bullish open but keep in mind that could quickly change with a couple big market-moving Economic reports before the bell.

The choppy price action has been challenging, and that could continue with another big round of earnings next week.  A,s you know, I like to reduce my weekend risk by taking some profits and avoiding adding new trades on Friday.  However, you never say never and with so many reports now in the rearview mirror there are good opportunities as long as we can stay out of a trade war with China.

Trade Wisely,

Doug