Choppy Week

I don’t know about you, but I will be happy to see this choppy, week come to an end.  I have spent the better part of the last 2-weeks talking about caution and avoidance of the choppy price action.  That caution has proved to have been correct, but just like everyone else I’m tired of the chop and hope next will be better as traders return from extended holiday vacations.

However, I plan to remain cautious into the weekend with the uncertainty of trade war rhetoric ramping up.  As of yesterday, every one of our positions held unrealized gains so I will be far more focus on taking profits today than I will be about adding risk ahead of the weekend.  With 3^rd quarter earnings season kicking off next week the market will at least have something else other than political wrangling from which to draw inspiration.

On the Calendar

We kick off the Economic Calendar this Friday with two potentially market-moving the reports at 8:30 AM Eastern.  First, consensus expects the Employment Situation report to show new job growth of 190,000 with the unemployment rate down to 3.8 percent.  Hourly earnings are also moving up in June with consensus suggesting a 0.3 increase and a year-on-year rate up to 2.8 percent.  The International Trade deficit is expected to narrow sharply to $43.7 with a 2.1 percent increase for exports while the imports only gained 0.2 percent.  After that, we have the EIA Natural Gas Report @ 10:30 AM, the Baker-Hughes Rig Count @ 1:00 PM and Treasury STRIPS @ 3:00 PM.

A very light day on the Earnings Calendar with only three companies reporting.  Keep in mind is the calm before the storm of 3^rd quarter earnings which officially kicks off next week when some of the big banks report.

Action Plan

I plan to wrap up the end of this odd trading week much the same as it began with caution.  Yesterday day ending on a positive note but whipped several times on anemic volume.  Currently, Futures are pointing to a negative open as the market reacts to the tariff battle.  Keep in mind with the Employment Situation number which comes out before the open that could quickly change.

Next Friday the 3^rd quarter earnings season will get underway giving the market more to think about other than political uncertainty.  Perhaps we will finally exit this choppy consolidation and pick a direction next week.  Volume should improve next week as traders return from their extended holiday vacations and price action should become more deliberate without all the whipsaws.  Trade war rhetoric could ramp up this weekend as both the US and China lob threats back an forth.  Plan your risk into the weekend carefully.

Trade Wisely,

Doug

Whipsaws

Over the last five days of trading, we have seen the market open with significant gaps follow by whipsaws.  Twice the market gaped down only to find buyers and whip back up.  There were also three days when the market gaped up only to end the day lower as seller whipped prices back down.  So after 100’s of points of daily travel in Dow whats the result?  The Dow is up a whopping 59 points!

So the fact that the Dow Futures are pointing to another gap of about 150 points this morning ahead of tariff increases and the FOMC minutes release should we be rushing to enter trades?  Fool me once shame on you, fool me twice shame on me.  Don’t allow the fear of missing out to control your trading decision, wait for better price action or wave goodbye to your capital as the market continues to chop up accounts.

On the Calendar

A busy day on the Thursday Economic Calendar.  Potential market-moving reports begin at 8:15 AM with the ADP Employment Report which the consensus expects 190,000 jobs created in June but keep in mind ADP’s accuracy is very hit and miss.  Weekly Jobless claims come out at 8:30 AM and forecasters expect a decline to 223,000 vs. last weeks reading of 227,000.  The unforecast EIA Petroleum Status report is at 11:00 AM and last but not least is the release of the FOMC minutes at 2:00 PM.    Non-market moving reports include Mortgage Applications @ 7:00 AM, Challenger Job-Cut Report @ 7:30, Consumer Confort Index &  PMI Services Index @ 9:45, five Bond Announcements, Fed Balance Sheet & Money Supply @ 4:30 PM.

On the Earnings Calendar, we have only six companies reporting today that are unlikely to move the market.

Action Plan

It’s interesting that the US Futures are positive today in light of the fact that Asian markets were moved lower during the night with new tariffs set to begin tomorrow.  Of course, with have seen big daily morning gaps the last several days that have proved punishing for those that chased the open.  Will today be different?  Only time will tell, but it would also be wise to remember that the FOMC minutes will be out at 2:00 PM today and volume could easily be anemic with traders extending their holiday vacations.  It would not be at all uncommon for the market to become light and choppy as we wait for the FOMC minutes.

I intend to remain cautious particularly during the morning rush.  Remember whipsaws are possible just like we have seen the last five trading days in a row.  Also, keep in mind that the Big Employment Situation number will be out Friday before the market open, so another big morning gap is possible.  The big question is in which direction?

Trade Wisely,

Doug

Difficult Decisions.

The open of the market today is presenting traders difficult decisions.  Currently, the Dow Futures suggest around a 100 point gap up at the open.  Will you dive in head first on a day the market closes early ahead of a holiday shutdown?  Or, will you remain cautious and risk missing out on a possible market bottom?  Certainly a difficult decision amid all the political uncertainty with the new tariffs taking effect on July 6^th.

Trading is a marathon, not a sprint and I know if the market begins a rally there will more than enough opportunity for me to make money without having to chase a gap ahead of a holiday.  We could see a bullish follow through on Thursday when trading resumes, but there is no question in my mind that it could just as easily reverse producing a bearish open on Thursday.  As for my decision; Instead of adding risk I will be looking to take advantage of the morning gap by taking profits and reducing my market exposure ahead of the holiday shutdown.  Your difficult decision awaits, plan your choice carefully.

On the Calendar

Ther are two potential market-moving reports on this short day of trading.  The Motor Vehicle Sales report according to consensus will reach a 17.0 million annualized rate in June vs. the 16.9 million units in May.  At 10:00 AM Eastern Factory Orders which includes data on non-durable goods expects to come in unchanged.  The Redbook comes out at 8:55 AM but is not expected to have any price impacts on the market.  Keep in mind the market will close early at 1:00 PM Eastern time in observance of Independence Day and will be closed all day Wednesday.

There are only six earnings reports today and looking over the list I would say none of the reports are likely to move the market.

Action Plan

It was nice to see the Bulls battle their way back after gaping sharply lower at the open.  The good news is that all the major indexes held just slightly above prior lows.  The bad news is that even with the rally all the indexes lacked the energy to break above current downtrends.  The trend of big morning gaps looks to continue this morning with Dow Futures suggesting a gap up around 100 points.  Keep in mind even with today’s morning gap the Dow will still be about 200 points below its 50-day average.  The SPY looks to recover it’s 50-day average at the open while the QQQ and IWM successfully held above this key average.

As you know, I’m always cautious about large gap opens and the fact this one is occurring just before a major holiday and a short session only increases my level of caution.  Remember volume is very likely to drop significantly after the morning rush.  Rather than adding new risk, I would be more inclined to take advantage of the morning bullishness to take some profits ahead of the holiday shutdown.  I wish you all a fantastic holiday as we celebrate our 242^nd year of Independence.

Trade wisely,

Doug