Big beautiful bullish candle.

Yesterdays, big beautiful bullish candle, rejected the low with considerable strength.  Unfortunately, all of the indexes remained just below resistance, so it was not a game changer just yet.  A one day move can be the clue to a directional change but it in no way confirms a rally is at hand.  For that to happen, we need a follow though that breaks and holds resistance.  We can easily have the morning pop break the resistance level and create a lot of emotion.  However, until we see actual buying stepping in to support the breakout and following through then all we had yesterday was a nice move inside a chop zone.  I hope this is bullish; I want it to be bullish!  Experience and discipline to follow my plan prevent me from chasing hope.  Show me follow though, and I will gladly get on board the Bull train.  As of right now, price, is still below resistance and a current downtrend continues to exist.  Keep that in mind as you plan your day.

On the Calendar

We start off the Economic Calendar with the ADP Employment Report at 8:15 AM Eastern time.  The ADP number has missed the mark wildly several times this year.  Last month they did call for an increase in the payrolls, but it was still quite short.  This month the ADP consensus is again to see an improvement but to 185K.  At 8:30 AM we latest read on the GDP.  Consensus sees an improvement to 2.8% as the second estimate for the second quarter.  The GDP number is also expected to show a slight improvement in consumer spending to 3% which is a good sign for the economy.  AT 10:30 we will hear from the EIA Petroleum Status Report.  Once again we need to see a decline in supplies if want the oil companies to support the overall market and begin to recover.

The Earnings Calendar has just short of 70 companies reporting earnings today so stay on your toes!  Also, keep in mind that we have the big  Employment Situation number on Friday morning.  It is not abnormal to see the market get choppy with light volume as we wait for that number.  Also, keep in mind with the Labor Day just around the corner many of the big guys could begin taking off the Hamptons early for an extended weekend.

Action Plan

Yesterday the markets showed some surprising strength shaking off the concerns of North Korea and jumping into rally mode.  All four of the major indexes left behind encouraging bullish candles.  As nice as that for to see all they did is move up to challenge resistance levels without actually breaking out.  So today it’s all about the follow-through to confirm yesterdays move.  A big, beautiful bullish candle with out follow-through below price resistance would turn out as nothing more than a good day within a chop zone.  Currently, the futures are pointing to a positive open so let’s hope we do see the Bulls step up and provide a little more confidence in direction.

As for me, and the members of RWO, we are holding some very nice gains in several positions.  A continued bullish move would most likely only improve our profits.  I will, however, need to see some real buying after the morning pop before I consider adding new positions.   If the Bears happened to reassert themselves here at resistance, then I want to be prepared to take some profits off the table.  I guess what I’m trying to say is don’t be blinded by yesterdays bullish candle.  Look at the overall chart and acknowledge that we are still in a downtrend and below resistance.  There is no good reason to speculate if this is the bottom or not.  Wait for it to prove and prepare a plan to react once it has proved.  That alone will improve your Win/Loss Ratio!

Trade Wisely,

Doug