As harsh as the selling might have felt during the morning session but thus far the bulls defended index 50-day average supports.  A very good sign but with so many big earnings reports rolling our this week we should expect more volatility over the next couple of weeks with both bullish and bearish surprises. 

Earnings season normally produces significant overnight market gaps adding complexity to your trading decisions.  New US/China trade tensions and newly imposed sanctions on Venezuela also adding stumbling blocks effecting price action volatility.  Keep in mind the tech bellwether AAPL reports after the bell today opening the door for a Wednesday market gap.  Clearly, there is a lot to consider as we plan our risk in the day ahead.  Be careful not to over-commit and stay focused on price action.

On the Calendar

On the Earnings Calendar, we have 112 companies reporting today.  There are more notable reports today than I can list here but keep in AAPL, AMD and EBAY report after the bell today.

Action Plan

After a steep decline during the morning session, the bulls went to work showing a willingness to defend the 50-day average support of the indexes.  A good sign but the real test will be after the market bellwether AAPL reports after the bell this afternoon.  Currently, futures are suggesting a modest decline this morning, but with so many earnings reports before the bell, I would expect something very different by the open.

New tensions this morning as US and Russia impose sanctions on Venezuela and new tensions on the US/ China trade negotiations as the US files criminal charges on the china mobile device maker Huawei.  Keep in mind that the FOMC meeting begins today which will culminate with their rate decision Wednesday afternoon.  AAPL’s earnings report will set the stage for a flurry of big tech reports this week.  Unfortunately, most of them will report aftermarket close which sets the stage for significant market gaps the next morning.  Consider the gap risk as your plan ahead and expect considerable price action volatility. 

Trade Wisely,

Doug

A big week of heavyweight earnings, big economic reports, and the FOMC rate decision the conditions are right for the perfect storm for high volatility.  With prices testing the long-term downtrend resistance and the short term trend up and appearing overextended it’s unwise to ignore the possibility of a selloff.  There at a lot of clues pointing to caution.  However, the direction will likely come down to earnings results and the FOMC decision. 

Because many of the Tech heavyweights report after the market closes, we should also expect the possibility of overnight reversal gaps and plan our risk accordingly.  Asian markets closed mixed but mostly lower while European markets are currently lower across the board.  US Futures have been under some selling pressure all morning and currently suggest a lower open.  Stay focused on price action and don’t be surprised to see higher volatility and challenging price action ahead.

On the Calendar

On the Earnings Calendar, we have a very big week ahead with more notable earnings than I have the time to note here.  Make sure you’re checking earnings reports against all current holdings and new positions you’re considering.  Today we have 73 companies reporting.

Action Plan

The market has a lot to deal with over the next couple weeks, and I would suspect the price action could become more volatile and trading could become more challenging.    On the Economic Calendar this week we have the FOMC rate decision on Wednesday along with the GDP report and then the big Employment Situation number on Friday to name some of the heavyweights.  We also have a big week of earnings with many of most market influential companies reporting which could easily make for some wild price swings.

Price action wise we are simultaneously in the perfect price pattern for the market to rise or fall and I believe it will all be up to the FOMC and how the earnings come out that will decide the direction.  Believe me, I don’t want to see the market pullback, but I think we should prepare for that possibility.  Unfortunately, if it does happen there is a high probability will begin with an overnight gap.  Of course the same is true if the news supports higher prices because many of the big techs report after the bell.  Set your bias aside, remain flexible and focused on price as this week unfolds.  Remember sometimes less is more and we don’t have to trade every day to be successful traders.

Trade Wisely,

Doug

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