Yesterday’s huge morning gap failed to find follow-through buyers as volatility weary traders choose to sit on their hands searching for clarity to the big issues clouding the path forward.  While we could hear of new developments in the trade war at anytime resolution of its uncertainty is likely weeks if months away.  Fed Chairman Powell may provide some clarity on the FOMC’s thoughts on interest rates when he speaks on Friday, but until then the market will stay focused on fluctuating bond rates, earnings, and economic reports to try and find inspiration.

Asian markets traded flat but mostly lower as China set new loan prime rates in an attempt to stimulate economic growth.  This morning European markets are trading cautiously and mostly flat as recession fears continue to linger.  US Futures also point to a flat but slightly lower open this morning as we wait and search for clarity.  What comes next is anyone’s guess.

On the Calendar

On the Tuesday Earnings Calendar, we have less than 50 companies reporting today.  Notable reports include CREE, TOL, URBN, HD, KSS, MDT, and TJX. 

Action Plan

With markets responding to improving bond rates, the market gapped strongly higher yesterday but failed to find follow-through buyers as the market chopped sideways the rest of the day.  Traders are finding it difficult to trust the recent price action with so much uncertainty clouding the path forward.  Perhaps yesterday’s price action was a prelude to a resting consolidation relieving some of the intense volatility of late as we wait for clarity.

Technically the indexes remain in a downtrend with price challenged by overhead resistance as well as moving average resistance.  Unfortunately, we are unlikely to get much clarity this week in the trade war, but perhaps the Fed Chairman will help clarify the FOMC’s next move when he speaks on Friday.  With earnings season winding down the market will turn to economic reports to try and find inspiration and will likely continue to be very sensitive to the political spin as it searches for answers.  Choppy consolidating price action, though very boring, maybe just what we need calm the nerves of traders after a will couple weeks of trading.

Trade Wisley,

Doug

With bond yields bouncing and the market suggesting a huge gap up, open traders face difficult decisions this morning.  If the current futures bullishness holds the DIA, SPY, QQQ, and IWM will gap directly into the price and moving average resistance.  Do you trust price action enough to risk your capital and hoping for follow-through buying or even a short squeeze to be triggered?  Do you wait to see if this is a bull trap with the bears ready to defend resistance creating pop and drop pattern?  Or could the morning gap get no follow-through commitment from the bulls or bears and we to consolidate the big gap the rest of the day?

Whatever you decide given the wild volatility we have experienced the last couple of weeks, it will require considerable skills to navigate the price action successfully.  Before leaping ask yourself these questions.  Are you following your rules? What is your plan if your wrong? Do you have and edge or are you just gambling your hard-earned money?  Do your skills match the current market condition?  There are no easy answers in a market full of news-driven uncertainty and emotion.  There are only difficult decisions to make with such high volatility.  What will you decide? 

On the Calendar

On the Earnings Calendar, we have nearly 60 companies reporting on Monday.  Notable earnings include WB, EL, & BIDU.

Action Plan

The relief rally that began last Thursday afternoon is betting a big boost of energy this morning as bond yields bounce and inversion fears subside.  Unfortunately, with the Dow currently pointing to a gap of more than 200 points, retail traders have a tough decision to make.  A big pop like this can certainly trigger a short squeeze, but it can also create a nasty pop and drop if it finds no followthrough buyers.  Indeed a difficult decision with such high price volatility that has proven to punish both bulls and bears with news-driven reversals.

Even with the big gap up this morning the DIA, SPY, QQQ & IWM will still be under the Price resistance of the last high and their respective 50-day moving averages.  If the big morning gap holds throughout the morning, the T2122 will likely signal a short-term overbought condition at the open.  Make no mistake that does not mean immediate bearishness will resume, but it does suggest caution and that we should avoid chasing with the fear of missing out.  Buyers could follow-through to squeezing out short traders, bears could be ready to defend the resistance levels creating a pop and drop pattern, or we might gap with no commitment from bulls or bears consolidating the rest of the day.  Your difficult decision awaits.

Trade Wisely,

Doug

Lots of questions with very few answers created a very frustrating day of price action on Thursday.  As bond yields finally began to moderate late afternoon, the market picked a direction and provided a least a modest relief rally into the close.  A good round of earnings reports after the bell and a bit of bond market stabilization during the night lifted spirits around the world.  The big question for traders this morning, can we trust this mornings bullishness amidst all the volatility enough to add risk heading into the weekend still full of uncertainty?

Overnight Asian market closed modestly bullish across the board as bond yield slightly improved.  European markets are moving higher this morning after a technical issue delayed the open in the UK.  US Futures are solidly bullish this morning with the Dow pointing to a gap up of more than 200 points.  Be careful not to chase the open in-case this wildly volatile decides to pop and drop.  Also, consider carefully the amount of risk your willing to carry into the weekend.

On the Calendar

We get a little break on the Friday Earnings Calendar with just 68 companies reporting earnings today with DE as the most notable.

Action Plan

Will, there be real progress on trade negotiations or not?  Will the FOMC reduce the rates or not?  Will, the Bond Rates, invert and remain inverted or not?   Will China send troops into Hong Kong to put down the protests or not?  Will the global economic slow down effect the US economy or not?  That uncertainty created another very volatile session on Thursday, and until we get some clarity is likely to continue to create very difficult price action for traders to navigate.

Yesterday T2122 signaled an oversold condition, but with so much uncertainty the market struggled until late afternoon when it finally managed to put together a little relief rally.  A round of good earnings reports after the bell also lifted spirits, and treasury yields somewhat stabilizing during the night has futures pointing to a significant gap up this Friday morning.  The question is, can we trust it, or could it produce a pop and drop pattern or even worse another lower high within the downtrend? Secondly, how much risk will traders be willing to hold into an uncertain weekend?  Nonetheless, any relief rally is a welcome sight after a week of heavy selling. 

Trade Wisely,

Doug

Early this morning China announced its tariff retaliation plan quickly reversing futures markets that had initially indicated a bullishness throughout most of the night.  August is typically a difficult month with last-minute vacations and the beginning of a new school year but this year has been particularly challenging with all the political and economic uncertainty.  Sadly, I think the intense price action volatility is likely to continue into the near future.

Overnight Asian markets closed mixed but mostly higher even as China once again lowers their economic growth expectations.  However, European markets are decidedly bearish this morning in reaction to the trade war retaliation from China.  US Futures have fluctuated wildly this morning ahead of several big earnings reports and huge day of market-moving economic reports.  Expect wild price gyrations today as the market digest all the data.

On the Calendar

We have a major decline in the number of earnings on the calendar today with just 45 companies reporting.  However, we have several market-moving notable reports which include, WMT, BABA, AMAT, CSIQ, DDS, JCP, NIO, NVDA, and TPR.

Action Plan

I think it’s fair to say that the Trader’s Almanac was certainly right this year about August offering up challenges.  Crossing over the midpoint of August I wish I could say that the volatility is nearing an end but with all the trade uncertainty and global market indicators continuing to flash warning signs of recession I suspect that is not the case.  US Futures most of the night were pointing to a significant rebound from yesterday selloff, but China put the kibosh on bullishness announcing its tariff retaliation plans early this morning.  Off in the distance, you can likely see the tweet-storm clouds building.

Today we have a huge day of economic reports for the market to digest as well as several big earnings reports likely to fuel the fire of volatility.  With futures now indicating another nasty gap down at the open we should expect the 200-day moving average to begin pulling very hard on the SPY.  Expect bond yield inversion fear-mongering to continue today as markets react to China’s tariff retaliation today.  The silver lining in all of this is that great stocks are now at sale prices and when the selling finally ebbs there will be some fantastic bargains to be had.  Until then, protect your capital, wait for your edge to return and hold fast to your trading rules that protect you from emotional decision making.

Trade Wisely,

Doug

✨✨✨ NOTE: If you are having trouble logging in to the trading room and using the Chrome browser, login to your members page on the Hit and Run Candlesticks website for instructions to resolve the issue. ✨✨✨

Punishing price volatility continues today nearly reversing yesterday’s sudden and massive rally.  The decision to delay the tariff increase until December 15^th suddenly reversed trapping short traders in one of the fastest moving short squeeze rallies I have seen in my trading career.  Unfortunately, that didn’t resolve the bond rate inversion that occurred that is once again punishing those that picked up long positions yesterday. 

Asian markets rallied slightly on the tariff increase delay, but massive protests in Hong Kong dampened the response.  Economic data out of Germany raising concerns of a European recession have their markets seeing red across the board this morning.  Still facing significant technical damage and a bond yield inversion signaling a possible recession in the US, futures are pointing to a sharp overnight reversal with Dow pointing to a gap down of nearly 250 points.  Buckle up as another volatile market day begins.

On the Calendar

The Wednesday Earnings Calendar is the last big day of earnings reports this season with more than 250 companies reporting.  Notable reports include A, GOOS, CGC, CSCO, IHRT, LK, M, NTAP & VIPS.

Action Plan

After the Whitehouse decided to wait until December 15^th the market moved up like a rocket has been strapped to its back.  Unfortunately, the trade war is not the only thing the market has on its mind right now, and the rally stopped about as quickly as it began after running into price resistance around the 50-moving average.  This morning the market must come to grips with the 2 and 10-year bond rate inversion which occurred as we slept.  Rate inversion is not a perfect indicator of recession but has accurately signaled it correctly the vast majority of the time. 

Consequently, it looks as if the punishing price volatility will continue this morning with US Futures pointing to a substantial gap down at the open.  Not helping the matter is that European markets have also swooned after a German GDP shrank by 1% fanning the flames of global slow down and recession.  Technically, the indexes continue to have a lot of technical damage to repair despite yesterday’s rally and the punishing overnight reversals have made it nearly impossible to trade except for the very experienced day-traders.

Trade Wisely,

Doug