A Nasty Battle

Yesterday’s price action turned out to be a nasty battle between the Bulls and Bears with whipsawing leadership several times and likely chopping up accounts.  At the end of the day, the Bears came out victorious leaving behind bearish candle patterns across all 4-major index charts.  Normally that would suggest some follow-through bearishness this morning, but instead, the market seems inclined to serve up another overnight whipsaw.

Asian markets closed mixed and European seem to be following suit, but the US Futures are casting aside Turkish jitters with the US Futures decidedly bullish this morning.  News that an agreement between the US and Mexico is easing trade tensions.  Is this the energy we need to run for new market highs?  Maybe, but remember the lesson given us yesterday; Chasing the open with a fear of missing out can serve up some big losses if the market whipsaws once again.  Carefully plan your approach to the market this morning with that in mind.

On the Calendar

The Economic Calendar gets going early this morning the NFIB Small Business Optimism Index at 6:00 AM Eastern.  Then at 8:30 AM we get the only potential market-moving report with Import and Export Prices.  Forecasters expect import price 0.1 percent higher in July with export prices increasing 0.2 percent in July.  We have Redbook @ 8:55 AM, and two Bond Auctions at 11:30 AM to close the calendar day.

On the Earnings Calendar, we have more than 250 companies reporting earnings today with retail reports as a central theme.  After today the volume or earnings reports drops substantially as the 3^rd quarter earnings start to wind down.

Action Plan

I think it’s fair to say that yesterday’s price action was an absolute mess as uncertainty driven whipsaws ruled the day.  Across all 4-indexes daily bearish candles were left behind suggesting a high likelihood of more bearish price action today.  Well, not so much!  It would appear after an announcement that the US and Mexico have come to terms on a new trade agreement all the Turkish jitters have taken a back seat.  Once again Futures began to rally around midnight and have continued to push higher with the Dow currently suggesting a 100 point gap up.  If you feel a twinge of pain from whiplash, you’re not alone as the market continues to be very challenging to trade.

Is this the news we needed for the Bulls to launch to all-time highs in the QQQ’s, SPY and IWM?  Or perhaps could this be just another whipsaw that continues to chop up accounts.  Your guess is as good as mine!  Avoid getting caught up in the opening drama and resist the urge to chase the gap.  If you rushed in yesterday and punished for doing so, don’t repeat the same mistake today.  Fool me once shame on you, fool me twice shame on me.  I for one will wait for the morning rush to pass and stay focused on price action watching for clues of follow-through buying before deciding on any new risk.

Trade Wisely,

Doug