Do you believe in magic?

I’m going to kick off this quarter with a little rant.  Over the long weekend, my email and social media feed’s filled with all kinds of offers selling the dream of simple market riches.  They all allude to some newly discovered indicator or pattern that can suddenly transform any trader into the super wealthy almost overnight.  That is total BS!  There is no magic or double top secret newly discovered formula you can buy that will make you rich.  Sorry to burst your bubble but it’s the truth.

There is only one way to success in any business.  It’s called hard work.  It’s the original and the only magic formula to success.  Start with some education, develop a trading plan (business plan) pull up your big-boy britches and get to work.  Trading success is a marathon, not a sprint.  There are obstacles to overcome and a lot of frustrating times on the path to success.  However, if you stay dedicated, disciplined, focused, willing to pay your dues and put in the overtime, then success can be yours.  Choose to believe in all that other mumbo-jumbo and plan to provide liquidity to those that do it the old-fashioned way.  Hard work!

On the Calendar

The Economic Calendar on the first trading day of Q2 the Economic Calendar hits the ground running with three important reports.  At 9:45 AM Eastern we get the PMI Mfg. Index which consensus expects to come in steady and strong with a 55.7 reading.  The ISM Mfg. Index at 10:00 AM expects a slight decline to 60.0 vs. the 60.8 February print that hit a very strong 14-year high.  Also at 10:00 AM is Construction Spending which consensus suggests will bounce 0.5% higher in February vs. the flat reading in January.  There are 7-bond events on the calendar as well as a Fed Speaker at 6 PM to round out the day.

On the Earnings Calendar, there are 132 stragglers expected to report Q4 2017 earnings today.

Action Plan

On Friday the Bulls managed a nice bounce of more than 250 Dow points.  The bullish sentiment spread across the all 4 of the major indexes but they all remain in down-trending patterns and below significant levels of price resistance.  Historically stocks do much better in April, but we seem to be getting off to a rocky start for the Q2 with the Dow Futures currently suggesting a gap down open of more than 75 points.  China announced the new tariffs on more than 120 products yesterday as our two governments square off for a Trade War and keeping the markets on edge.

After a 3-day weekend, it’s normal to see some light and choppy trading as traders extend their vacations one more day but that may not be the case today with so much nervous energy.  With earnings and economic reports continuing to demonstrate strength, our current uncertainty is by-in-large politically generated.  Political volatility is very challenging to trade because complete market reversals can occur as often and as quickly as the political spin shifts.

Trade Wisely,

Doug

Three-Day Weekend

With the wild 2018 Q1 coming to an end today it seems very appropriate it culminates with a three-day weekend.  Tensions have been very high, and nervous traders could use some time to decompress and prepare for Q2.  Typically, volumes drop ahead of a long weekend and price action becomes quite choppy.  However, with frayed nerves and emotions, high anything is possible.  Keep a close eye on the price action watching for clues of additional selling as traders may choose to go into the long weekend with their cash safely tucked away in the account.  On the other hand, the bulls could attempt a little relief rally in a reaction to the 200-day average on the SPY and DIA.  Long story short prepare for anything ahead of this three-day weekend.

On the Calendar

On this last trading day of Q1, the Economic Calendar has several potential market-moving reports.  At 8:30 am the Jobless Claims consensus is looking for a slight decline of 1000 to a 228k print vs. 229K last reading.  Also at 8:30 AM, forecasters expect the Personal Income and Outlays report to show a 0.4% increase in personal income.  Consumer spending is also expected to rise 0.2% with the closely watched core PCE price index coming in at 0.2% in February and a 1.5% annualized reading.  Consumer Sentiment is at 10:00 AM and expected to remain strong with a 102.0 forecast reading.  There are several other non-market moving reports throughout the day, a Fed Speaker at 1:00 PM, and a couple of bond-related events to close out the quarter.

The Earnings Calander shows 89 companies stepping up to report today.  Make sure you have a plan if you’re holding or considering an entry on stocks that are reporting.

Action Plan

Yesterday indexes experienced some 2-sided choppy price action as the bulls and bears battle around the SPY and DIA 200-day average.  The Dow traded in a chop range of more than 350 points making it a very challenging and frustrating environment for most traders.  Currently, the Dow Futures are pointing to gap up open that but still within yesterday’s choppy range.  With a 3-day weekend ahead don’t be surprised to volumes drop quickly after the morning rush.

Have an awesome extended weekend everyone.  Happy Easter!

Trade Wisely,

Doug

Extreme Volatility

Resistance proved to be too strong yesterday with the bears laying in wait to ambush the morning rally.  Current price action is displaying such extreme volatility even the most adept and experienced day traders find it challenging.  Trying to navigate such volatile price action as a swing trader would only be suitable for those with a very high tolerance for risk.

I have been warning that swing traders have little to no edge when a market becomes so violently emotional.  If your continues to be chopped up, stop trading until the market calms down and your edge returns.  Standing aside during times like this does not make you less of a trader.  In fact, I would argue it makes you the smart CEO of your trading business that recognizes when the risk is just too high.  Remember cash is a position that can serve you well in times as volatile as these.

On the Calendar

There are a total of five reports that come out at 8:30 AM Eastern on this last hump day in March.  Two of the five, GDP and International Trade in Goods could easily move the market while with corporate Profits, Retail Inventories and Wholesale Inventories unlikely to do so.  The GDP number according to consensus is expected to rise slightly to 2.7% annualized vs. the last reading at 2.5%.  Consumer spending should hold steady at a 3.8% rate with the GDP index unchanged at 2.3%.

Consensus suggests the deficit in International Trade will narrow slightly to 74.0 billion vs. December reading of 75.3.  At 10:30 the Pending Home Sales Index is expected to bounce back 3% after posting a sharp 4.7% decline in February’s report.  The EIA Petroleum Status report produced a surprise decline in supplies on the last reading helping to boost oil prices.  It’s 10:30 AM reading today is not forecast forward but does have the potential of moving the market on its release.  We have a Fed Speaker at 11:30 AM, two note auctions and then Farm Prices report at 3:00 PM to close this busy day.

The Earnings Calendar shows 83 companies are expected to report results today as if there is not already enough to keep us on our toes today.

Action Plan

Yesterday I suggested it would be wise not to chase the morning gap and to be careful buying as the market pushed up toward resistance levels.  After a nice morning rally which looked steady and consistent, the market ran headlong into a bear ambush.  At the close, all four of the major indexes closed with bearish candle patterns as high volatility continues to plague the market.

With the Dow, less than 500 points away from its 200-day average it seems the odds would favor the bears testing this important level.  Please exercise caution if you do plan to trade and remember swing traders have very little edge when such volatility exists.

Trade Wisely,

Doug