Earnings Season

With the analysis expecting a strong 2nd quarter earnings season there may finally get the catalyst need to pick a direction and stop all the flip-floping price action.  If we do begin to recover the path ahead is filled with lots of resistance hurdles and political uncertainty it must continue to manage.  However, a good round of earnings could do a lot to calm the nerves of traders and investors as long as inflation remains in check.

Although earnings create is own brand of volatility it will mostly directed at individual stocks.  Anything is possible, but my hope is the big daily swings will subside, but I would continue to expect frequent market gaps and fast price action as markets deal with resistance and react to the earnings reports.  The fast price action could still be very challenging, but earnings may be the light at the end of the tunnel we have been waiting for to give an edge back to  good stock pickers.

On the Calendar

The Friday Economic Calendar has three Fed Speakers at 7:30 AM Eastern, 9:00 AM and 1:00 PM to both open and close the calendar day.  At 10:00 AM Consumer Sentiment is expected to soften slightly to  101.0 vs. March reading of 101.4, a 14 year high.  Also at 10:00 AM the JOLTS report is also expected to ease but continue to show a strong labor demand at 6.143 million job openings.  The 1:00 PM, the Oil Rig Count, is not expected to move the market.

Second quarter earnings season kicks off today with C, JPM, PNC, and WFC all reporting before the bell.  Analysts are expecting very positive results from the banks showing substantial earnings growth.

Action Plan

With easing Syrian tensions, the bulls stepped up to the plate yesterday and displayed strength all the way through the close.  With several big banks expected to kick off 2^nd quarter earnings with strong results, do we dare hope for a bullish follow-through today?   I can only guess, but if earnings come in as strong as expected, then I would venture an answer of yes, and it could finally help reduce market volatility.

Keep in mind; the index charts have a lot of overhead resistance they still have to overcome, and an armed conflict with Syria will continue to weigh heavy the mind of the market as we head into the weekend.  If in fact, the market does spill off some of this extreme volatility then swing traders with good technical skills could find a target rich environment of discounted stocks.  I wish you all a wonderful weekend.

Trade Wisley,

Doug

Threat of military conflict.

With 2^nd quarter earnings just around the corner, I get the impression the market wants to go up but is tentative due to the threat of military conflict with Syria.  Another consideration is the coming weekend.  Will traders hold with the uncertainty of military action or will they prefer to exit positions much like we saw last Friday?  As the CEO of your trading business, what will you do?  Making the decision even harder is the daily reversals in the overnight futures prices.  It’s a tough call.

There are a lot of charts shaping up and forming good patterns, but with the market flipping direction on a daily basis it’s difficult to plan trades when your edge and slip away in the overnight session.  If you do decide to trade it may be wise to take smaller than normal positions as a way to compensate for the uncertainty.  If the market moves in your direction and actually follow through for more than just one day one could always add to the position.   With the VIX stubbornly holding above a 20 handle expect volatility, whipsaws and fast price action to continue.

On the Calendar

We kick off Thursday with the weekly Jobless Claims at 8:30 AM Eastern which consensus expects to come in at 230,000 showing strong labor demand.  Also at 8:30 AM is the Import & Export Prices which expects imports to show a modest increase of 0.2% with export prices up 0.3%.  Nonmarket moving reports form Bloomberg Consumer Comfort Index, Natural Gas Report, 4-bond events, Fed Balance Sheet, Money Supply and a Fed speaker at 5:00 PM to finish up the calendar day.

On the Earnings Calendar, I see 24 companies are stepping up report results today.  Remember 2^nd quarter earnings officially kick off tomorrow with several big banks reporting.

Action Plan

Yesterday a gap down of about 200 points and this morning a gap up of more than 100 points is currently indicated in Dow Futures.  The VIX continues to rest above a 20 handle and above its day moving average as sabers rattle between the US and Russia.  With the uncertainty of conflict, oil prices continue to sharply rise which we will likely translate to higher prices at the pump very soon.

With the uncertainty, we should prepare for fast price action and quick reversals if military action begins.  Let’s hope cooler heads prevail, and an armed conflict never occurs.  These daily reversals are becoming tiresome, but perhaps we can get some relief with the kickoff of 2^nd quarter earnings and see a direction maintained beyond a single day.  However, with the weekend just around the corner, traders will have to decide if they want to hold with the threat of military conflict looming.  It could be a bumpy ride.

Trade Wisely,

Doug

Follow Through

Yesterday’s big bullish move was certainly encouraging.  Obviously, the market has no trouble making big daily moves and has certainly proved that over the last couple weeks.  Following through, on the other hand, seems to be a puzzle the market seems unable to solve.  Yesterday the Dow gaped up nearly 300 points and managed to push higher closing up 428 on the day.  However, with the Dow Futures currently indicating to a gap down of more than 200 points at the open follow through once again appears to be a major problem.

To maintain a trading edge, most traders need at least one day of follow through in a stocks price action.  Even during periods of normal market consolidations, good technical analysts can do very well.  Unfortunately, when the market experiences big overnight gaps on a daily basis that changes direction almost every day maintaining an edge is nearly impossible.  The good news is this very whippy price action will eventually end, and better days lie ahead.  Protect your capital and wait for those better days when the market proves it can follow through or watch your account get chopped to pieces trying to fight the whip.  The choice is yours.

On the Calendar

On the hump day, the Economic Calendar has four potential market move reports.  At 8:30 AM Eastern the Consumer Price Index is expected to come in flat according to consensus.  Core prices could see a modest 0.2% increase with the overall CPI rising to 2.1%.  At 10:30 AM is the Petroleum Status Report which is not forecasted forward but has recently seen supplies decline supporting oil prices.  Then at 2:00 PM we get to take a look at the minds of the FOMC with the release of the minutes which can obviously move the market.  Also at 2:00 PM is the Treasury Budget which is expected to show a large deficit of 186 billion.

On the Earnings Calendar, we only have 11 companies reporting earnings.  Notable before the bell is FAST and after the bell, BBBY step up to report.

Action Plan

We whip up one day and whip down the next, chopping up accounts and destroying the confidence of traders trying to fight it.  After a nice gap up and run yesterday traders now face another overnight reversal with the Dow Futures pointing to more than a 200 point gap down.  If you stand in a fire, then you have to accept the likelihood you will get burned.  There is little to no edge for swing traders in this kind of whippy price action.  As a result, I will continue to stand aside protecting my capital from being chopped up and waiting for an edge to return.

Trade Wisely,

Doug