Deadlocked

Typically the week of Black-Friday the retail stocks put the markets higher in anticipation of the holiday spending frenzy.  A quick look at the ETF, RTH on a weekly and monthly chart you will a very nice breakout to new has occurred suggesting a rally is possible.  However, a quick look at the indexes and we see up-trends but also a tightly range-bound price action in the DIA, SPY and the QQQs.  The Bulls and Bears appear deadlocked in a rising volatility environment.   Because of that, I suggest a little caution is in order.  If the DIA breaks down through price support, the Bears could gain the advantage.  On the other hand, if the QQQ can breakout to new record highs the Bulls could gain the edge.  We don’t want to bet caught in this struggle because very quick reversals can happen leaving us staring at large losses.   Focus on price action!  Clues to which side gains the advantage will always appear there first.

On the Calendar

On the Economic Calendar today we have a very light day.  First Leading Indicators at 10:00 AM and then bond auctions and announcements.  None of which would be expected to move the market.  Keep in mind this is also a Holiday Week which could volumes begin to decline by mid-week making for choppy price action.

On the Earnings Calendar, we have just over 50 companies reporting today.  URBN will report this morning, and INTU and PANW are among the afternoon reports.

Action Plan

During the evening futures where sliding south at a pretty quick rate.  At my last look before going to bed, the Dow Futures were down nearly 60 points.  About 2 AM Futures began to turn around clawing their way all the back to even.  As of now, futures are mixed and almost even with Friday’s close.  Today the DIA is my biggest concern holding just above price support with a bearish price pattern.  Thursday’s big rally now appears on the DIA as a lower high.  The SPY and the QQQ’s are in better shape having left behind and inside day.  Last week I wrote a lot about the importance of follow-through.  As of now, last Thursday’s rally has not only not been unable to follow-through, but the DIA completely reversed on Friday.

As a result, the market is between the preverbal rock and a hard place.  A follow-through down in the DIA will test and could even break support possibility emboldening the Bears.  All the major averages are currently below resistance levels with the QQQ having the best chance of breaking to new highs.  If by chance the QQQ’s can muster the energy to break out the Bulls might be emboldened to push the SPY and the DIA higher.  As the indexes are in a pretty tight price range, there is not a lot of room for error.  Remain flexible and focused on price action for clues.

Trade Wisley,

Doug

Copy paste this link into a browser to watch the video.  https://youtu.be/-Uk1juPZC6Q

Defend Price Support

In yesterdays morning video I mentioned that it was going to very important for the Bulls to defend price support.  After a nail-biting dip below support to strip out tight stop-loss orders; the Bulls began to stand their ground and push back.  As always the important thing now is that they follow-through with a push higher and close the day above yesterdays high.  A failure to do will embolden the Bears and keep the current downtrend intact.  With a strong enough effort by the Bulls, a short squeeze could trigger if there are enough early short-hands betting against the market.

On the Calendar

Thursday’s Economic Calendar begins with three reports at 8:30 AM Eastern time.  The Weekly Jobless Claims consensus is for a reading 236K vs. the 239k last week.  Puerto Rico, however, remains a bit of wildcard on the jobless front.   The Philly Fed Mfg Index is expected to report 25.0 for November vs. the 27.9 October print.  The consensus for October Import prices is 0.4% with export prices expected at 0.1%.  At 9:15 AM forecasters are calling for 0.5% gain in Industrial Production for October with manufacturing production expected to increase by 0.3%.  Overall capacity utilization is seen rising to 76.3%.  The Housing Market Index at 10:00 AM is forecast to see November at 67 vs. the October 68 reading.

We have three Fed Speakers on the calendar today speaking at 9:15 AM, 1:10 PM, and 3:45 PM.  On the Earnings Calendar, we have just over 70 companies expected to report today.  Before the bell, we will hear from HP, SPLS & WMT and after the bell ROST, POST & GPS are just a few notables fessing up.

Action Plan

Yesterday saw the Bulls do a pretty good job of defending support levels on the DIA, SPY, and QQQs.  Unfortunately, the Bulls lacked the strength and motivation to fill the morning gap.  As of right now, the Dow Futures are suggesting a gap up of about 40 points but this earnings reports and a heavily laden Economic Calendar that could easily change.

As for me, I plan to continue exercising caution on new positions until I see the current short-term downtrend broken to the upside.  Of course, I will closely monitor current positions and prepared to take some profits as we move toward the weekend.  Remember volatility has increased so keep in mind fast intra-day swings are possible.  I’m guessing this week has produced a significant number of short sellers.  If the Bulls have the strength, this would be a very good place to trigger a short squeeze.  On the other hand, if the Bears maintain control, a failure here could create a rush for the doors.  I guess what I’m saying is be prepared for anything.

Trade Wisely,

Doug