Dow near record highs

Historically September is a down month according to the Traders Almanac, but it would appear the bulls didn’t receive that memo with the Dow near record highs.  In fact, the bulls only need to gain 1% to breakout to new highs in the Dow and with the futures suggesting a gap up open the SP-500 is poised to set a new record at the open today.  The QQQ and the IWM are lagging behind that’s not likely to deter the bulls from getting that bullish headline accomplished.

Keep in mind that the Dow has rallied just over 320 points in just 2-days.  Chasing this move now so close to highs would we unwise because profit-taking could begin at any time as we move toward the weekend.  Also, keep in mind that the FOMC meeting begins next week and the odds of an interest increase are very high so plan accordingly.  Fast price action, head fakes, whipsaws, and reversals tend to be prevalent at new market highs so stay on your toes and focused on price.

On the Calendar

A busy day on Thursday’s Economic Calendar begins with two market-moving at 8:30 AM Eastern.  First, the Weekly Jobless Claims expect the initial claims to come in at 210,000 bouncing 2K after 2-weeks at 50-year lows.  Second, the Philly Fed Business Outlook Survey has consensus looking for a  reading of 19.6 for September up sharply from 11.9 in August.   !0:00 AM brings the Existing Home Sales report which expects a modest increase to 5.360 million annualized vs. July’s 5.340 million.  Also at 10:00 AM we get the Leading Indicators report followed by the 10:30 EIA Natural Gas Report.  We have 7-Bond events between 11:00 AM and 1:00 PM today and wrap up the calendar day with Fed Balance Sheet and Money Supply at 4:30 PM.

On the Earnings Calendar, we have just 11 companies reporting today with DRI and THO among those reporting before the bell.  After the bell, MU and SCS are the most notable of the afternoon reports.

Action Plan

So far the market has certainly bucked the trend of weak September results with the Dow now just 1% away from new record highs and the SP-500 only 8.3 points away from all-time highs.  Although the number of stocks helping to lift the market has been in steady decline, it seems unlikely that the bulls will stop just short of a new Dow breakout.  Asian markets closed mixed but mostly modestly higher while European markets are currently decidedly bullish across the board.  Consequently, US Futures are pointing to a gap up open.

Remember to be careful chasing a gap especially at or near new record highs.  The Dow has rallied more than 320 points in just 2-days.  A push to new record highs seems very likely but keep in mind profit taking at the highs is also not out of the question.  As we head toward the weekend riding this big bullish wave make sure to take some profits along the way.

Trade Wisely,

Doug