Although yesterday’s selloff created a lot of technical damage it also offered a glimmer of hope for at least a little relief rally.  With the Dow having tested the psychological support of 25,000 and the SP-500 testing its 200-day average both indexes left behind hammer candle patterns that indicate at least a short-term bottom is possible.  Keep in mind that hammer patterns require follow through to be confirmed and that relief rallies may be very short-lived but a little break in the selling would is nice just the same.

Currency fluctuations, slipping bond rates and sharply rising grain commodities will continue to weigh heavily on the mind of the market let alone the happens in the trade war.  The market is still very sensitive to the news cycle so stay on guard for the possibility of very quick reversals and high price volatility to continue challenging traders skills. 

On the Calendar

On the Earnings Calendar we have just under 60 companies reporting today.  Among the notable reports DG, COST, BURL, CSIQ, DELL, DLTR, EXPR, GME, GPS, LULU, MOV, NTNX, ULTA & VMW.

Action Plan

Spending considerable time looking through charts last night there is now widespread technical damage across the majority of market sectors.  Having said that there is also a glimmer of light for a relief rally after the DIA tested 250 and the SPY found support at its 200-day average yesterday.  Please note that I didn’t say recovery because there is still a lot of work needed before occurs but a little relief rally would certainly be nice even if it’s very short lived.

Although currency fluctuations and slipping bond rates have the market on edge future are currently pointing to a modestly higher open today.  The GDP number, International Trade report and weekly Jobless Claims that all come out at 8:30 AM Eastern could lift the market spirits or dampen them quickly if the numbers disappoint.  Expect price action volatility to remain very challenging with quick reversals due to news sensitivity. 

Trade Wisely,

Doug

The market could sure use a positive story but today the hits keep coming.  The US as nine countries to their monitoring list of possible currency manipulators.  China threatens to withhold rare earth minerals essential to technology manufacturers.  Extreme weather and flooding across the majority of the gain belt is seriously delaying crop planting raising commodity prices sharply and raising concerns about future food prices.

Currently futures are pointing to a substantial gap down at the open threatening to break important price support levels this morning.  The odds of a 200-day moving average test in SPY and the QQQ are rising and Dow could easily slip to 25,000 if the sellers begin to pile on and fear of global slow down grows.  Expect increased volatility in prices and keep an eye on VIX as fear could quickly spike.

On the Calendar

Less than 40 companies expected to report earnings today with retail in the spotlight.  Notable reports include, ANF, UHAL, BMO, CHS, DAKT, DKS, GES, PANW, PVH, TLYS, VEEV & VRNT.

Action Plan

Markets around the world are reacting negatively this morning as currencies decline and commodities soar. The US added nine countries to its monitoring list of potential currency manipulators.  As a result the currencies weakened against the dollar putting pressure on stock prices.  In the next move of the trade war, China threatens to cut off rare earth minerals which are essential to technology companies.  Adding insult to injury grain commodity prices are rising sharply as weather events in the US have seriously delayed crop planting as flooding across the grain belt continues this spring.

Futures are pointing to a triple-digit gap down this morning with the all four of the major indexes threatening to open below key support levels.  If the seller pile on this morning we could see the DIA slip to 250, the SPY tests its 200-day average around 277 with the QQQ’s doing the same around 174.  Keep a close eye on the possibility of a fear spike that could greatly increase price volatility for the near future.

Trade Wisely,

Doug

Friday’s big morning gap that ended up going nowhere as volume quickly dried up heading into a 3-day weekend left behind more questions than answers.  While all four indexes remain in downtrends the Friday gap left behind indecisive candle patterns on the DIA and SPY while the QQQ printed a bearish engulfing just above key price supports.  With futures currently pointing to flat or modestly lower open which way we go is anyone’s guess.

Although it would be nice to get some directional answers today it’s possible we could see another day of light and choppy price action as traders may have extended their holiday vacations through today.  With the SPY and QQQ hovering near the midway point between their 50-day and 200-day averages stay flexible and focused on the price action for a directional clue.  Remember that currently downtrends are still in force at this time.

On the Calendar

We have less than 60 companies reporting earnings today.  Notable reports include BNS, BAH, HEI, NIO, WDAY & YY.

Action Plan

Futures opened positive and remained positive most of the night with Asian markets closing positive across the board as Trump concluded his visit with Japan in hopes of striking a trade deal.  Unfortunately, European markets are lower this morning on fresh worries of Italy’s growing deficit.  It would seem the Italian concerns are also weighing on the US Futures as well in the pre-market, currently suggesting a modestly lower open.

Friday’s price action seems to have left more questions than answers with indecisive price action ahead of the 3-day holiday weekend.  Although the QQQ finished Friday holding onto key support levels it also left behind a concerning bearish engulfing pattern as concerns that the trade war may transition into a tech war with China.  Although hopeful for better price action today it would not be abnormal to see struggle with light volume as many traders extend their holiday vacation one more day.

Trade Wisely,

Doug

Wild gaps continue to chop up traders accounts that try to hold positions overnight.  Thursday’s gap down trapped long traders and those that held short positions overnight will this morning fell the bite of the trap.  I’ve been warning that for a while that the current market condition favors day traders has certainly been validated this week. 

Now facing an uncertain holiday weekend traders have some big decision to make.  Hold positions into the weekend rolling the dice for the Tuesday open or close positions to avoid the risk?  I for one choose the latter and will slide into the weekend with my capital and weekly gains tucked safely away.  After the morning rush we could see light and choppy price action as trader’s head for the door to get an early start to the weekend.  Consider your risk carefully!

On the Calendar

We have a light day on the Earnings Calendar with only 13 companies reporting.  Notable reports include BKE, DXLG, FL, and HIBB.

Action Plan

This morning the futures are pointing to a significant gap which I am very happy to see but I struggle to understand the bullishness.  UK Prime Minister Theresa May resigned this morning and European markets are responding higher on the news.  Perhaps, the US markets see this as a signal that Brexit will not happen.  Yesterday’s gap trapped those holding long positions and it looks like this morning we will trap those holding short positions just before the long holiday weekend.

The markets wild movements have certainly confirmed my point that swing traders have no edge and this is a day traders market.  With the big gap up it is entirely possible that a short squeeze rally could be triggered this morning.  It’s also very possible the morning gap finds no buyers ahead of the long uncertain weekend and a pop and drop pattern is the result.  After the morning rush I would not be surprised to see the price action become very light and choppy as traders shut down early to begin their holiday.  Stay focused on price action and consider the risk carefully you carry into the weekend.

Trade Wisely,

Doug

I don’t know about you but I am becoming weary and frustrated with the daily overnight gaps and this morning we have another big one.  Asian markets closed lower across the board as the country stepped up their rhetoric increasing trade war tensions and elevating market fears that this could go on and on.  European markets are currently trading in red across the board as well with their added political uncertainty.

As a result the US futures point to a Dow gap down of more than 200 points at the open with the tech sector getting hit particularly hard.  As always we must be careful not to chase the gap but wait patiently to see if sellers support the gap or if this another bear trap as we’ve experienced several times during this downtrend.  With all the overnight gaps and reversal swing traders have little to no edge and although the price action has been very challenging it currently favors experienced day traders.  Be very careful and remember a big part of a traders job is to protect your capital and if you have no trading edge then that becomes job number one!

On the Calendar

On the Earnings Calendar we have over 50 companies reporting results today.  Notable reports include, BKE, DXLG, FL & HIBB.

Action Plan

Another day another overnight gap and today it’s a doozie as trade war tensions grow.  Over the last few days there has been a growing hope that the indexes could recover their 50-day moving averages.  Unfortunitually, today’s gap down confirms the failure a raises the odds of a retest of May lows and the possibility of even a deeper selloff.  The current rhetoric coming from both countries suggests this stalemate in negotiations could be long-lasting.

As with any large gap be careful not to chase it short.  We must be patient making sure sellers support the gap after the open.  This morning’s move certainly has the potential to create some panic selling so keep an eye on the VIX if it begins to spike.  In the last couple of weeks we have also seen large morning gaps bring in the bulls to defend the morning low creating a significant rally.  Of course to this point those rallies have not proved to hold but has it has made this market downtrend particularly challenging for traders.  Day traders have the upper hand in the current market as the daily reversal gaps make it nearly impossible for swing traders to have an edge.

Trade wisely,

Doug

No written blog today due to a power outage at my home. I had it almost completed when the power went out for a few minutes and everything was lost. Grrr. 😜

On the Calendar

On the earnings calendar we have several notable reports. They include AAP, CTRP, LOW, NTAP, SCVL, SMRT, TGT, VFC & VIPS.