Wildly Bullish Reaction

After a wildly bullish reaction to China and the US re-engaging in trade negotiations, the Dow swung more than 600 points from low to high in a single day.  In my opinion that was an amazing gift that I took advantage of by taking some profits to the bank.  It is very likely that I will take more profits today as we head into the weekend.  Currently, the Futures are pointing to a flat open this morning.

The question on my mind is will the momentum of yesterdays rally carry us higher to test resistance levels or will profit-taking ahead of the weekend win the day.  Considering the recent volatility of the market anything is possible.  Set your bias aside and stay focused on the price action.  Keep in mind a US-China deal has not been made.  What could the market reaction be if they fail to agree?  It may be wise to go to the bank today with at least some of your current profits.

On the Calendar

A lighter day on the Economic Calendar this Friday with only one potential market-moving report.  At 10:00 AM Eastern Consumer Sentiment expects to remain unchanged with a very strong reading of 97.9 according to forecasters.  Also at 10:00 AM we get reports on E-Commerce Retail Sales & Leading Indicators which are not expected to move the market.  To close out the calendar week is the Baker-Hughes Rig Count at 1:00 PM.

We also have a rather light day on Earnings Calendar with only nine companies reporting.  The most notable DE which will report before the opening bell today.

Action Plan

After rising nearly 400 points on the news that China and the US have come back to the negotiation table, it makes you wonder what the reaction would be with a completed agreement?  From the Wednesday low to the Thursday high is a swing of more than 600 points!  Amazing, but where do we go from here?  After such a big move it would not be out of the question to see some profit taking ahead of the weekend.  However, the sheer momentum of yesterdays move could also carry us a little higher to test resistance levels.

The SPY only needs to gain about 2.50 points to break an all-time high with the QQQ would have a bit more work to do, needing to rise about 3.5- points.  It seems hard to imagine they could get this close and not be able to break out but this resistance level has proven itself to be difficult to breach.  I personally consider yesterdays move a tremendous gift and used it to take some profits and will most likely continue doing so today.  Have a wonderful weekend!

Trade Wisely,

Doug