Day-1, SPY New Record High

If you ever had a question if the bulls still controlled the market that should have dissipated yesterday.  Day-1, SPY New Record High and the QQQ’s are not far behind.  A good reminder to never short a trending market.  Over the next three days, there is a lot of important economic data coming out, and I would be surprised if any of it is not supportive of current prices.  Also, keep in mind that Earnings Season is just around the corner and many stocks could rally in anticipation.  Only yesterday in the QQQ we saw how just how much analysis upgrades on key stocks can dramatically reverse an indexes direction.  By the way, analysts are bullish on earnings growth this year.

On the Calendar

The hump day Economic Calendar really gets going at 10:00 AM Eastern with the ISM Mfg. Index and Construction Spending.  Consensus for the December ISM is down just slightly to 58.0 vs. 58.2 last report but continues to be very strong.  Construction spending is expected to make a solid gain of 0.6% with residential spending leading the gains.  Then at 2:00 PM we have the release of the FOMC minutes.

There are 12 companies expected to report earnings today.  UNF & CNC report before the bell with RAD and RECN after the bell.  Make sure you are checking as part of your daily preparation.

Action Plan

The DIA, SPY, and IWM continue to remain in a chop zone however at the end of the trading day seemed to have found some bullish inspiration.  The QQQ, on the other hand, had an incredible day completely reversing a rather bearish appearance to a full on bullish stance.  I would expect the QQQ’s to make its first record high of 2018 very soon an accomplishment the SPY managed to pull off at the close yesterday.

Futures are currently pointing to more than a 40 point Dow gap up at the open.  Keep in mind a Dow 25,000 print is not that far away and after resting the last couple weeks may soon find the energy to make a push higher.  The VIX made a sharp decline yesterday afternoon and now looks like it could once again test historical lows.  There is no fear in this market.  Keep in mind that the market could easily slip into choppy price action after the morning rush as it waits for the release FOMC minutes.  Expect higher volatility right after the release as the market digests the new information.

Trade Wisely,

Doug

Price will lead

2017 was an unbelievable year, but 2018 could be even better.  Price will lead the way.  I know there a lot of folks out thinking that because the market has run up so much, it necessarily must pullback.  That is without a doubt a possibility, but it is also far from a sure thing.  Unemployment is at historic lows, and consumer confidence is at historic highs.  Manufacturing is growing, and finally, real wages are beginning to increase.  The analysis suggests earnings growth may be as good or better this year as the last.  Perhaps it would be best not to trade what we think and focus on what we see in the price action.  The institutions always have and will always determine the direction of the market.  If we can set aside our bias, focus on price and simply follow it rather than trying to predict direction: Then 2018 could indeed exceed our expectations.

On the Calendar

One important report and a slew of bond-related auctions and settlements for this first trading day in 2018.  The PMI Manufacturing Index is at 9:45 AM Eastern today.  Last month PMI rose 1.2% on increasing orders and employment, but forecasters see the index standing pat at the same 55.0 reading this month.

There are five unconfirmed potential earnings reports today, but they all come after the bell.  Remember January begins a new round of earnings so make sure to develop the habit of checking coming reports.  The fireworks don’t really begin to ramp up until mid-month, but there is no time like the present to start developing a good habit.

Action Plan

The last trading day of 2017 had a very nice start to the day, but profit takers quickly began to rule the day.  The DIA, SPY, and IWM left behind bearish engulfing patterns while the QQQ’s seemed to give up a short-term support.  Historically January is a positive month as the bulls find value after a tax selling pullback in December.  However, no such pullback occurred this year.  Only a choppy consolidation that essentially held the bullish trend.  So what happens next?  As of right now, I have to recognize the bearish candles left behind on Friday a proceed with caution.  At the same time, I want to be careful not to jump to a bearish conclusion by trying to get short.  Remember last week was low-volume chop which is not exactly a confidence builder for direction.

Futures are currently pointing to a bullish open but don’t be surprised if today is another low-volume showing as many traders may have extended their holiday vacation time.  I plan to move slowly to as far as adding new positions today, but I certainly will rule out the possibility of new trades.  Let’s keep in mind that the FOMC minutes are out tomorrow and the Employment Situation number is Friday morning.  Both tend to inspire choppy indecisive price action.

Trade Wisely,

Doug

Focus on Improvement

It’s customary as the year winds down to reflect on the past year.  While I’m very grateful for the amazing results that 2017 provided, my focus tends to center on the year ahead.  I’m not talking about trying to predict the future as so many traders attempt to do.  No matter how 2017 turned out for our future has yet to be written.  As a result, I tend to focus on improvement as a trader.  As the CEO of my trading business, I must always be on the lookout for ways to improve so my business can grow.  Most people don’t like change but change we must it achieve better results.  Embrace the change and challenge yourself to improve.  Today, right this minute, make the decision to step up.  Be willing to do whatever it takes to exercise your right to succeed.

On the Calendar

The Friday Economic Calendar is devoid of any market moving reports today.  There are two note settlements and an oil rig count report but other than that a quiet day.

On the Earnings Calendar, there are only eight companies expected to report as we wind down the trading year.

Action Plan

After the morning flurry of activity, the market as expected slipped into choppy price action.  It was surprising to see some bulls wake up in the last 30 minutes of trading to close the DIA, SPY, and IWM higher on the day.  The QQQ’s, on the other hand, decided just to rest.  Dow futures are pointing to a bullish open that may come close to making a record high print at the open.

Overall the trends continue to remain bullish with no signs of any meaning selling or market fear.  Nevertheless, I plan to avoid adding risk just ahead of a long holiday weekend.  As a result, my focus is on profit taking and capital protection today.  There are a lot of very good looking charts on my shopping list for next year.  Expect volume to decline a quickly today as many traders will be headed out for New Years celebrations.

2017 has certainly been an exciting record-breaking year filled with amazing profits for which I am very grateful.  I want to wish you all a safe and Happy New Year.

Trade wisely,

Doug