Russell, New Record High!

Yesterday turned out to be very productive for current positions.  The Russell poked a finger in the eye of resistance breaking through to a new record high.  The SPY and QQQ had solid moves higher with the DIA lagging in more of a consolidation pattern.  Currently, the Futures are pointing to a flat to slightly lower open however that could quickly change with earnings reports and economic news.  Today is the Speaker Ryan’s imposed deadline on the North American Trade Agreement and the trade negotiations with China begin as well.

Although IWM set a new record high yesterday keep in mind the SPY, QQQ, and DIA remain under significant resistance levels.  As a result, we must watch for the possibility of reversal at or near resistance and prepare plans if the unfortunate event occurs.  Business requires planning and trading is a business like any other!

On the Calendar

Market-movers on today’s Economic Calendar are the Weekly Jobless Claims and the Philly Fed Survey both of which come out at before the bell at 8:30 AM Eastern.  Consensus estimates suggest Jobless Claims will increase to 215k vs. the last reading at 211k but continue to demonstrate a strong labor demand.  The Philly Fed Survey forecast is 21.0 for May vs. the April reading of 23.4 as it pulls back from a nearly 50-year record high.  The reports not expected to move the market, Consumer Comfort, E-Commerce Sales, Leading Indicators, Natural Gas report, 8-bond related events, Fed Balance Sheet, Money Supply and two Fed Speakers.

On the Earnings Calendar, WMT reports before the bell along with 40 other companies throughout the day.

Action Plan

As your planning for the day keep in mind that the SPY, QQQ, and DIA are still below significant resistance levels.  As they approach test these key levels, it’s important to stay focused on the price action.  No matter how much we want prices to break through resistance, we have to prepare for the possibility they could fail.  I think a consolidation in this area would be my personal preference to build energy one way or the other.  As you know what we want and what we get are two very different things, and as of now, Mr. Market has not called to ask me what I prefer.  Consequently, I have to remain unbiased and have a plan for all possibilities.

Trade Wisely,

Doug

Stuck in the Middle

With the indexes wedged between the significant levels of support and resistance, it reminds me of that old Stealers Wheel song, “Stuck In The Middle With You.”  The bears could easily take control and drive us down toward support, or the bulls could quickly mount another attack on resistance depending on which side finds the inspiration.  Pre-market earnings or economic new could easily provide that inspiration as could news on trade negotiations or the North Korean leader issuing threats.

So whats a trader to do?  Remain flexible and unbiased, stay focused on price action and have a plan ready for either direction.

On the Calendar

On this hump day, we have three potential market-moving reports on the Economic Calendar.  At 8:30 AM Eastern the Housing Starts consensus expect April starts to come in at 1.324 million annualized vs. 1.319 million in March.  New housing permits according to consensus will decline slightly to 1.350 vs. the 1.379 reading last month.  Industrial Production comes out at 9:15 AM and consensus expects a solid 0.6 percent gain with manufacturing growing by 0.3 percent.  Forecasters also expect Capacity Utilization of manufacturers to grow to 78.3 percent in April.  10:30 AM brings the EIA Petroleum Status Report is not forwardly forecast but has supported higher oil prices with U.S. reserves slowly declining.

There is a 7:00 Mortgage App. Report, a 10:00 AM Atlanta Fed Business Inflation expectation report and 2-Fed Speaker at 8:30 AM and 6:30 PM, none of which is expected to move the market.

The Earnings Calendar shows 55 companies reporting today with M coming in before the bell and CSCO after the market close.

Action Plan

After the morning gap down yesterday, the bears made a solid attempt to move the market lower but the bulls put in a very strong effort lifting the indexes of the low of the day before the close.  Unfortunately, DIA, SPY, and QQQ are currently floating about halfway between significant support and resistance levels so price could easily break in either direction.  Futures have been bouncing between a positive and negative this morning as it waits on early earnings reports and housing numbers to find inspiration.

With North Korea kicking sand at the U.S. and ongoing trade negotiations we need to remain flexible because just one news report could influence the direction of the market in about half a heartbeat.  Stay focused on price and have a plan for either direction today.

Trade Wisely,

Doug

Healthy Market

In the last couple morning notes, I have suggested a consolidation and or a pullback could begin at any time.  Not because I’m bearish but because that’s what a healthy market does.  It tests its boundaries and seeks out price support or resistance.  As a swing trader, I have learned to embrace consolidations and pullbacks because that’s good entries can be found.  However, as a trading coach, I often find that inexperienced traders fear the possibility of pullback rather than seeing it as the natural progress of price action.

It should be no big surprise the emotions of fear and greed are the normal cause.  Consider these two simple rules if you’re currently struggling with this problem.  1.  Only buy stocks that are at or near price support with a buy signal.  Don’t predict or anticipate the buy signal, wait for it to occur before entering.  2. Sell stocks (take profits) that or at or nearing resistance.  These simple rules helped me many years ago when I struggled with fear and greed, and if you build them into your trade plans I’m confident they will also help you.

On the Calendar

The Tuesday Economic Calendar gets started today will a Fed Speaker at 8:00 AM Eastern, and we have another one this afternoon 1:10 PM.  At 8:30 AM the biggest number of the day Retail Sales expects a moderate 0.3% according to consensus.  Also at 8:30 the Empire State Mfg Survey expects a 15.5 vs. the April report of 15.8.  Business Inventories at 10:00 AM forecasters see a modest 0.2 percent increase with sales slightly outpacing inventories.  Also at 10:00 the Housing Market Index expects home-builder confidence to come in flat at 69 even though home sales and permits are both accelerating.  The last of the potential market-moving reports is at 4:00 PM when Treasury Internation Capital reports it’s tracking statistics of financial instruments in and out of the United States.  Other than that we have the Redbook and a single bond auction to complete the calendar day.

On the Earnings Calendar, we have the last big of 2^nd quarter reports with nearly 250 on today’s docket to keep traders and investors on their toes.

Action Plan

Yesterday marked the 8^th day of the current Dow rally (up 68 points) that has seen the index rise more than 1450 points from last Thursday’s low.  Although a bullish day the indexes ended the trading slightly under pressure from profit takers leaving behind possible short-term topping candle patterns.  Futures are currently pointing to a slightly lower not helped by the sales miss in the Home Depot earnings report early this morning.  However, with the nearly 250 companies reporting today and a busy economic calendar topped by Retail sales, anything is possible.

After such a big rally a consolidation of the gains or a pullback to test support would be very healthy for the market.  However, let’s not assume the bulls will give up just because the indexes printed some topping patterns.  Remember candlestick patterns require follow to confirm them and with new record highs within reach on the QQQ’s and IWM the bulls find inspiration almost anywhere.  Let’s keep in mind the deadline for the North America trade agreement is Thursday, and the market could be very sensitive to the news and or the negotiated results.  As always stay focused on price action.

Trade Wisely,

Doug

Striking distance of 25,000

In the last 7-days of bullish price action, the Dow has recovered more than 1200 points and is now once again within striking distance of 25,000.  The questions now, do the bull have enough energy to punch through or will be bears defend this important psychological level as resistance.  The IWM is less than 1-point from making record highs, and the QQQ’s would only have to rise about 3.5 points to do the same.  Earnings continue to come in strong, and there are several big reports this week can certainly have the potential of moving the market.

We also have several big economic reports to consider this week and the likelihood of Trade Negotiations news adding in some nervous volatility.  So this week brings the bullish possibility of new records and bearish potential that the bears could defend price resistance.  With the Futures indicating a gap up open watch for the possibility of whipsaws as we get close to price highs.

On the Calendar

A light day on Monday’s Economic Calendar with only two Fed Speakers and three bond events which are unlikely to move the market.  Keep in mind that Retail Sales number are out Tuesday and Wednesday brings Housing Starts and Industrial Production numbers.

The Earnings Calendar for 2^nd quarter earnings begins to wind down this week, but Monday and Tuesday are still full days of earnings reports.   We have 188 companies reporting results today.  Although it’s winding down, there are still some big reports through the week such as DKS, HD, M, CSCO, WMT, and CPB.

Action Plan

If big earnings reports, retail sales numbers, and housing starts were not enough to focus on the market may also have politically generated trade jitters to deal with this week.  Speaker Ryan has imposed a Thursday deadline to complete the renegotiation of the North American Free Trader Agreement.  The new agreement is largely expected to be market positive, but according to reports completing their work by Thursday’s deadline may not be possible.  Also, trade negotiations between the U.S. and China are scheduled to begin this week, which obviously has the potential to create some market shock waves.

Currently, futures suggest a bullish open with the Dow gapping up more than 50 points.  On Friday the Dow closed within striking distance of 25,000, but I would not expect this resistance to break easily.  After a 7-day winning streak, don’t be surprised to see some profit-taking or price consolidation to begin at any time.  The IWM is close to an all-time-high breakout, and the QQQ’s are also nearing price highs.  If the bulls have the energy, it is also possible to see some new records set this week as long as the political news doesn’t upset the apple cart with trade jitters.  Although I took some profits and hedged some positions last week, I will remain bullish until the price action tells me otherwise.  There are a lot of very nice charts to choose from but be careful not chase.

Trade Wisely,

Doug

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