Our government works in mysterious ways as two failed votes to reopen the government inspires confidence that a compromise may be forthcoming.  That hope is inspiring the bulls this morning with the US Futures suggesting a substantial gap up open.  Earnings, Durable Goods Orders, and New Hope Sales results may enhance the bullishness or temper that sentiment by the open but so far the bulls appear firmly in control.   

While the indexes were content to consolidate there was steady buying pressure showing up in a lot of stocks yesterday.  I personally found it very difficult not to overextend myself with so many great looking chart patterns and setups appearing.  As for now, this is a stock pickers market with a lot of good price action signals.  Unfortunately, we still have to hold our breath as we enter positions because all the government uncertainty could easily reverse the current sentiment in about half a heartbeat.  Keep that in mind as you consider the weekend ahead and the risk that can bring to your portfolio.

On the Calendar

Durable Goods Orders – Consensus – 8:30 AM Eastern

New Home Sales – Consensus – 10: AM Eastern

Baker-Hughes Rig Count – 1:00 PM ET

On the Earnings Calendar, we have 38 companies reporting.  Notable today: ABBV, APD, CL, DHI, LEA, NEE, SYF, & VOD.

Action Plan

While the indexes continued to consolidate yesterday, there was consistent buying pressure showing up in a significant number of stocks.  So many in fact it was difficult to stick to my plan and avoid becoming over-committed while still testing resistance in the indexes.  Both bills voted on yesterday to reopen the government failed, but that is now being viewed as a good thing because Senate leadership is finally trying to work out a compromise. 

Overnight Asian markets rallied despite the trade war jitters that continue to crop up every few days.  European markets are also bullish this morning helping the US Futures point a substantial gap up open of more than 150 points as a write this.  Of course Earnings and the two big economic reports could certainly change that before the open.  With the renewed hope that the government shutdown may soon consider your holdings carefully as we move into the weekend.  If the market does open with a nice gap up, I will likely bank some profits to reduce my weekend risk.  I wish you all a great day and a fantastic weekend!

Trade Wisely,

Doug

The market appears stuck between a rock and a hard place as talk of an economic slowdown, political uncertainty both domestic and abroad, and earnings season unfolds.  Indexes dance between significant levels of price resistance and current short-term trend supports waiting for the event that will determine direction.  While I believe it’s very healthy that the markets are consolidating all the outside influences means traders will have stay on their toes and prepared for just about anything.

Be cautious about over-committing to a directional bias as we chop around in this tight price action range.  Just one event could change direction, and unfortunately, that could easily happen overnight.  Yesterday’s whipsaw price action should serve as a reminder of a nervous market and how quickly sentiment can shift.

On the Calendar

On the Earnings Calendar, we have the biggest day this week with 125 companies reporting results.  Notable earnings: ISRG, ALK, BMY, DFS, ETFC, FCX, HBAN, INTC, JBLU, MKC, NSC, RCI, LUV, SBUX, UNP, GWW, WDC.

Action Plan

There was more conversation from IMF’s Lagarde about an economic slowdown overnight with China as the point of concern.  As a result, we see muted and mixed markets around the world.  As I write this US Futures, suggest a flat open, but I suspect that could change dramatically as the morning earnings results roll out.  Two bills to end the government shutdown mover forward to a today but both are currently expected to fail.  That’s really not important, but the heightened political spin leading up to the vote and the aftermath could certainly affect the market attitude.

As of now the Bulls and Bears appear deadlock with the indexes slipping into a consolidation range.  Personally, I think this rest is healthy for the market as we build a level of price action support just above the 50-day moving averages.  Unfortunately, with all the political uncertainty, economic slowdown talk and earnings results just one event could substantially change market sentiment.  That could mean a fast move up or a fast move down, and traders should prepare for the possibility of either.  A directional over-commitment could be a mistake as we continue to dance between support and resistance levels.

Trade Wisely,

Doug

Although the selloff yesterday may have been painful for may long traders there was a silver lining showing at the close.  After a hard test of their daily 50-averages, all four of the major indexes bounced and closed at or just above this key psychological support.  This morning US Futures are currently suggesting a bullish open, but a lot will depend on the morning earnings reports if that holds.

With little on the Economic Calendar today, political uncertainty and global growth concerns, there is significant pressure for companies to perform and prove they can support current price levels.  Yesterday the VIX indicated a little fear is coming back into the market.  Couple that with earnings and we have a recipe for increased volatility hinged directly upon earnings results.   

On the Calendar

On the Earnings Calendar, we have 93 companies reporting today.  Notable reports, F, ABT, CP, CTXS, CCI, FFIV, KMB, LRCX, LVS, NG, PG, TXN, UTX, & XLNX.

Action Plan

A decline of 3% in Existing Home Sales yesterday enhanced the premarket fears of an economic slowdown pushing the Dow down 300 points.  However, after a hard test of the daily 50-averages, the bulls responded showing at least an initial willingness to defend it as support.  As tenuous as it may seem, the uptrend is still valid thus far and perhaps we a consolidation will develop.  Earnings Reports will be a key element over the next few weeks that determine market direction. 

According to new reports, the Presidents proposal to reopen the government will come to a vote later this week, but the opposition vows it will not pass.  Pressure from employee groups continues to increase as some 800,000 continue to work without pay.  Futures this morning are pointing to a bullish open currently suggesting a gap up of more than 100 points providing some relief to yesterday selloff.  Unfortunately, the bullishness has little to no tailwinds with Asian market having closed nearly flat on the day and European markets mixed but currently mostly lower.  With little on Economic Calendar, today Earnings Reports will be in high focus.

Trade Wisely,

Doug

Three day weekends are a nice break for traders, but they tend to create volatile price action and market reversals upon the reopening.  On Friday I mentioned my intention of taking profits and reducing risk ahead of the long weekend.  With the futures currently suggesting a Dow gap down between 150 and 200 points at the open, I’m that my profits safely tucked away before the close on Friday.

Should we not panic as if the sky is falling?  No, after such a huge market runs a pullback or consolidation is normal and healthy as long as price support hold and the bulls show a willingness to defend them.  The IMF report citing global growth concerns have markets around the world reacting negatively to the possibility of an economic slowdown.  However, the real test for our market will be company earnings reports.  So stay focused on price action, support, resistance, and trend for clues to market direction.

On the Calendar

We have 81 companies reporting earnings today with notable earnings COF, FITB, HAL, JNJ, PETS, PLD, STLD, AMTD, TRV, UBS & ZION.

Action Plan

Concerns on of global growth concerns after an IMF report, the Government Shutdown in entering day 32 and new concerns about US/Trade negotiation progress have the bears pushing a bearish open today.  Asian markets all closed in the red overnight, and European markets are also lower across the board.  As a result, Futures are currently pointing to gap down open between 150 to 200 points lower at the open. 

The economic report of Existing Home Sales and a significant number of Earnings Reports this morning could easily improve or worsen the situation depending upon the results.  As nasty as this gap down may seem at the moment, keep in mind the indexes are currently holding above price support levels and their respective 50-day moving averages.  The expected pullback or consolidation is a healthy thing as long as the bulls defend support levels.  Keep in mind earnings season tends to increase market volatility and big morning reactions are typical.  Which means bearish markets can reverse bullish and vice-versa so remain flexible and focused on the price action and the patterns within the charts.

Trade Wisely,

Doug