Another day, another reversal.

On the close of Monday, it looked like the market had picked a direction Tuesday delivered another potential reversal signal.  This kind of price action is not uncommon at or near market highs, but that doesn’t help us as traders when we continually receive reversal patterns.  Ond day everything points to Bulls in control, but before you know it, tide shifts and Bears appear to gain control destroying your confidence and chopping up your account.  The only way to avoid this to stop trading but that’s not something most of us want to hear.  We want it, and we want it NOW!  As for me, I will continue to trade, but I plan to trade less only taking the best fo the best setups.  I also intend to trade smaller than normal positions to diminish my overall risk in the event I’m whipped out, by yet another reversal.

On the Calendar

The hump day Economic Calendar has a couple of important reports for the market to chew on this morning.  First off at 10:00 AM Eastern time we get the Existing Home Sales number which was disappointing in April.  Today the consensus says we should see a rebound to a 5.550 million annualized rate.  There some concern that rising home prices might affect this number going forward.  At 10:30 AM is the EIA Petroleum Status Report.  The number last time continued to show a decrease in overall supply, but it was not enough to stop the decline in oil prices.

On the Earnings Calendar, we have 14 companies expected to report results today.  There two big tech companies MU and ORCL that report after the close.  Both companies will be important to the QQQ’s index to heal some of the technical damage it has suffered recently.

Action Plan

Yesterday saw light volume choppy price action most of the day.  At the end of the day, the Bears gains strength pushing the SPY lower nearly filling the entire gap left behind on Monday.  The DIA remained stronger avoiding a bearish engulfing candle by a tiny margin.  With the reports from ADBE and FDX coming in strong after the close I was expecting to see the futures in positive territory, but as of now, they are showing slight weakness.

Adding new risk has been difficult as the market chops and whips around.  Just when you think the all clear has sounded and we get price action that raises a lot of concerns.  I will continue to look for new trades, but until I see this market settle down, I plan to take smaller positions.  If I’m not whipped out, I can always add to the trade later.  Remember activity does not equal achievement.  Trading less or not trading at all during choppy times protects your capital.

Trade Wisely,

Doug