Yesterday I mentioned that the market needs a rest, but he tenacious
bulls had other plans yesterday printing the 5th straight day up since
September. The Dow has now recovered 2254 points in 11
days, and yet nothing has changed with the
political uncertainty. There has been progress in the trade negotiations but still, no agreement and the government shut down at 21
days is now tied for the longest in history with no apparent resolution in
sight.
Please understand I’m not suggesting bearishness I’m only
pointing out the curious nature of the market and how important it is to follow the price action and trade the chart without trying to predict. I still believe the market needs a little
rest or pullback, but big opportunity
may be just around the corner. As we
head into an uncertain weekend, I suggest
being careful chasing this rally which appears
stretched in the short-term. However, I
would be preparing a watchlist of candidates
that could soon setup great swing and positon trades.
On the Calendar
On the Earnings Calendar,
we have a light day with only eight companies reporting with INFY the most
notable reporting before the bell.
Action Plan
The Bulls proved to very tenacious
yesterday defending price levels every time
there was even a hint of profit-taking. One would think that kind of pressure would continue
through the end of the week, but
interestingly enough the futures appear to be lackluster
this morning. As I write this, the US Futures are suggesting a flat open
as we enter the 21st day of the government shutdown. That ties for
the longest shutdown in history, but as
we head into the weekend, there seems to
be no resolution
in sight.
Trade negotiations this week proved to be productive, but there are not stories coming out that there is a lot of work to be done before finalizing an agreement. Now the question is will bulls remain strong as we head into the weekend amid all the uncertainty? T2122 continues to signal caution and suggesting a short-term overbought condition but as you know price action is currently not confirming that conclusion. We will have to tread carefully this morning to see if the bulls have the energy to push higher or if the profit-takers take control ahead of the weekend. I would suggest being very careful about over-committing to long positions this late in the rally.
Follow-through below yesterdays low could lead price back to test the $254.55 / $252.85 area. The past four days the buyers have been able to string together four new highs and four new lows, however, the $258.00 area is proving to be more of a task then the buyers anticipated with the narrowing of the range. Follow-through below yesterdays low could lead price back to test the $254.55 / $252.85 area. The $258.00 resistance line is what we have talked about the last few days is also where the 60-min. 200-SMA has camped out.
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VIX–X Chart – The VIX chart shows not bullish sign as of yesterday’s close but very oversold, Side note: The T2122 4wk New High/Low Ratio chart is pegged in the overbought area.
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Climbing more than 2200
points in just 10-days, the US futures this morning are suggesting a
little rest might be in order. As we
enter the 20th day of the government shutdown and as of now no
indication of when an agreement with China might occur there is still significant
uncertainty for the market to ponder.
With the VIX closing below a 20 handle perhaps we could see a simple consolidation rather than
the punishing selloff we have experienced lately. With hundreds of charts indicating possible
bottoming patterns, a little rest or pullback could set up some great entries
for swing and position traders. Remember
that the market is likely to remain very sensitive to political news and still subject
to quick price action and reversals so remain flexible and focused on price
action. Great opportunity for swing
traders and good stock pickers may be just around the corner so dust off that
wishlist and be prepared.
On the Calendar
On the Earnings Calendar,
we have 17 companies reporting earnings
today with none that are notable unless you happen
to own one of them. Remember earnings
season is coming,
it would be a good time to get into the habit of checking reporting dates.
Action Plan
With a failed meeting between the President and Democratic congressional leaders our government shut down now enters day
20. The news on US / China trade remains
positive, but there has been no
indication as to when a decision might be forthcoming. After notching a 4th bullish day,
the futures are suggesting the market needs a little rest this morning. As I write this the Dow indicating a gap down
just short of 100 points but I do expect that improve during the pre-market
pump.
Climbing more than 2200 Dow points in just ten days a little rest is definitely warranted, but that does not necessarily mean we are due a significant selloff. The best scenario would be a consolidation as we wait for some resolution of all this government uncertainty. Let’s keep a close eye on price support levels in the indexes. The good news is with so many charts showing signs of bottoming a pullback, or some consolidation could be just what the doctor ordered to set up trade entries. Polish up your watchlist because major opportunity may be just around the corner.
After three days of negotiations,
the US team is packing up and heading home, and
the market has high hopes that a deal is forthcoming. Asian markets rallied
strongly when the negotiation extended into the unscheduled 3rd day
closing up sharply. European markets are currently bullish across
the board as well. As a result,
US Futures are suggesting a gap up open extending hopes for a fourth day up, largely
ignoring the border wall wrangling and
government shutdown entering the 19th
day.
The current rally appears a bit stretched in the short-term and
bearish hanging man patterns were left
behind near resistance levels is a concern so be careful not to chase. A little profit taking is not out of the
question, but this bull rally could easily
extend if a US/China trade deal happens. Don’t fight the bull but don’t over commit long
and watch price action for possible reversals.
I guess the moral of the story is to be prepared and remain flexalbe.
On the Calendar
On the Earnings Calendar,
we have 22 companies reporting earnings.
Most notable are LEN and STZ before the bell and BBBY after the closing
bell today.
Action Plan
Hopes are high that the US / China negotiations have borne fruit after
extending for an unscheduled 3rd day. As the negotiations team packs up to head home, everyone is wondering if there is a deal
or if more decessions are necessary. As
of now, it would seem the markets are unconcerned
about the government entering its 19th
day and oval office speech that elevated tension between the warring parties.
Yesterdays gap, pullback and then afternoon rally left behind
possible hanging man candle pattern near resistance levels in the indexes. However,
on the trade deal hopes futures are currently
suggesting a gap up open of more than 50 points. While
a hanging man pattern at resistance is a reason for concern, if the bulls can
follow through for the 4th day
up the pattern loses strength. We will
have to see how the day turns out, but it would
be wise to pay close attention to the price action after the open and not to over-commit
long until the bulls prove they can stretch this rally further.
Follow-through below yesterdays low could lead price back to test the $254.55 / $252.85 area. The past four days the buyers have been able to string together four new highs and four new lows, however, the $258.00 area is proving to be more of a task then the buyers anticipated with the narrowing of the range. Follow-through below yesterdays low could lead price back to test the $254.55 / $252.85 area. The $258.00 resistance line is what we have talked about the last few days is also where the 60-min. 200-SMA has camped out.
VIX–X Chart – The VIX chart tested our $ 19.70 line with an Inverted Hammer with nine new lows out of ten candles. An oversold bounce seems to be logical within the next day or two. Side note: The T2122 4wk New High/Low Ratio chart is pegged in the overbought area.
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The US Futures are suggesting the 3rd straight day
of bullishness this morning wish is something the Dow has not seen since the 30th
of November. Trade negotiations with China continue today, and according to reports progress is being made,
and hopes for an agreement are
rising. As we enter day 18 of the government
shut down the President will bring his case the people this evening from the
oval office. A move, that is sure to create a firestorm of Washington spin and could affect
market volatility throughout the day and overnight.
The morning gap raises the possibility of a pop and drop pattern so traders should be careful not
to chase into the open until we see if there is follow-through
buying that supports the gap. With all
the political news swirling traders should stay focused
on price action and prepared for whipsaw and quick price action.
On the Calendar
On the Earnings Calendar,
we have 15 companies reporting with HELE and LNN as the most notable both of
which report before the open today.
Action Plan
With two days of
bullish price action behind us, the 3rd day in a row with a bullish
close a condition not seen since November
30th. Although we are in the 18th
day of the Federal Government shutdown, the
US Futures are pointing to bullish open this morning with a gap up of more than
150 points. The bullish sentiment appears based upon the positive reports that
the US and China trade negations are making progress that may soon result in a
deal.
The President will be speaking from the Oval Office this
evening taking the border wall debate directly to the people. Expect the political spin to reach new heights
and keep in mind the market could be very sensitive to the reports. With a large gap up this morning, we will need to be on the lookout for a
possible pop and drop unless buyers prove the ability to support the gap. Please keep in mind that that T2122 is in the
bullish reversal zone. That does not
mean a selling is imminent, but it does
suggest a short-term overbought condition that we must respect when considering
new long positions. Today could prove to
be a bumpy ride so stay flexible and focused on price action.
The SPY moved closer to the $258.00 resistance area yesterday on bullish follow-through from the Bullish J-Hook continuation pattern drawn yesterday. We have moved our Bull/Bear line from $248.450 to $250.10. A close above $250.10 we will consider bullish. A close above $258.00 could draw in buyers to challenge $263.75. Keep in mind above $258.00 puts price action in a dangerous area.
VIX–X Chart – Extended it’s downtrend yesterday closing below its 50-SMA, we have seen support approaching, and a bounce could be near. The government shut down, and China will play a big part in how the VIX acts.
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DISCLAIMER: Investing/ Trading involves significant financial risk and is not suitable for everyone. No communication from us should be considered as financial or trading advice. All information provided by it and Run Candlesticks Inc, its affiliates or representatives is intended for educational purposes only. You are advised to test any new approach before implementing it. Past performance does not guarantee future results. Terms of Service
