Party Crashers
Unfortunately, the Bears have decided to be party crashers today with a mean overnight reversal. I have over the last several days suggested raising caution levels and slowing market activity. As there were temptations everywhere in the charts, it was very difficult to maintain discipline. I stuck to my plan, and this morning I’m being rewarded for doing so because I have protected my capital. The VIX will likely see a sharp rise this morning opening the door for some very fast price action. I suggest new or inexperienced traders stand aside as the price action will likely become very challenging. Remember CASH is a position and in times like this can be the very best position!
On the Calendar
We have a busy Economic Calendar today, At 8:30 AM Eastern there are two very important potentially market-moving reports, Consumer Price Index and Retail Sales. Forecasters see the overall CPI rising 0.1%. Year-on-year is seen at 2.0% with the core number at 1.7%. Retail Sales is looking for October to rise by 0.1% as well with core readings as high as 0.4% indicating a fundamental strength in consumer spending. Also at 8:30 the less important report from Empire State Mfg Survey. Consensus expects a 26.0 reading for November vs. the October 30.2 which was a historic high for the Survey.
Business Inventories expected to rise 0.1% at 10:00 AM and at 10:30 the EIA Petroleum Status is expected to show a decline in overall demand. Keep in mind the oil number can be a big market mover. At 4:00 PM is the Treasury International Captial report as well as Fed speaker, but both are unlikely to move the overall market. There are over 70 companies reporting earnings today on the Earnings Calendar so stay on your toes and continue checking dates. TGT, TJX, and DKS will report before the bell placing a high focus on retail.
Action Plan
Another grinding day in the market yesterday where the Bulls pushed back after the morning gap down. The rally back up looks to have been a Bull trap considering the current futures readings. The clues in price action have been subtle however they have been there, and I have continued to suggest raising caution levels. Currently, the Dow Futures are suggesting a gap down of more than 100 points. Support levels in the DIA and SPY will require a strong Bull defense or could easily fail. If it support levels happen to break, prepare for the possibility of a quick and nasty selloff as stop-loss orders begin to trip in rapid succession. Expect a substantial increase in volatility at the open making for fast intra-day reversals and mean whipsaw price action possible.
The Bears appear to have gained at least a short-term upper hand, but I don’t expect the Bulls to give up without a fight. Don’t panic, focus on your trade plan. Consider taking profits on winning trades and allow stop-loss orders to protect your capital. Avoid the urge to chase the gap and never involve yourself in revenge trading. If your emotions seem out of control, then set your stops and walk away from your computer until your head for good business decisions returns.
Trade Wisely,
Doug
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VG – Consolidated For The Past 5 Days
VG – After breaking out price has consolidated for the past five days. Yesterday’s candle was a Bullish Engulf, both the 2 and 3-day charts have formed continuation patterns. The T-Line has now caught back up with the gap and price has closed over the upper T-Line Band for the past six days. The 34-EMA has turned up after tangling with the 50-SMA.
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Good Trading – Hit and Run Candlesticks
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► Eyes On The Market
The Bulls tried hard yesterday but could not close over our $258.45 line; this shows strength with the Bears at that level. The morning futures are suggesting the $256.00 line likely to be challenged; the 50-SMA has a high probability of being tagged. Weakness today could put price under the Volatility line and start a T-Line run to the downside. Remember the two most important lines we talked about yesterday in the trading room; they will give us the clues we need.
Rick’s trade ideas for the day – Requires Membership
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Investing and Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc. is financial or trading advice. All information is intended for Educational Purposes Only. Terms of Service.
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Bulls Step Up
After the gap down open it was nice to see the Bulls step up. They left behind bullish candles in the DIA, SPY, and QQQ. A very good sign but now it’s critical they follow-through to confirm. After the morning rally, the bullishness seemed to die on the vine with light volume chop dominating the rest of the day. A Concern? Maybe. The VIX also seems to register a concern with a slightly higher close yesterday.
There is certainly no reason to panic. As of now the trends in the market continue to be bullish. However, there is also a reason not to be complacent. Plan your trades carefully and be diligent with your trade management. Take some profits into strength and carefully manage stop loss orders. Avoid over trading and make sure your trades are sized correctly to your risk tolerance. Of course, this is a good course of action at all times saving your hard-earned capital and reducing emotional trading in the heat of the moment.
On the Calendar
Today on the Economic Calendar there are 2 Fed members and Janet Yellen speaking even before the market opens. Such an ambitious group. At 8:30 AM Eastern is the PPI-FD report. For, October, forecasters are expecting a core 0.1% increase vs. the September increase of 0.4%. Remove food and energy, and the number is 0.2% and remains the same with trade services excluded.
Today marks the last really big day of this earnings season. There are 290 companies set to step up and report today. HD, TJX, BZH, LMT & MBT are reporting just to name a few. There are still a lot more earnings to come, but they roll out a much slower pace going forward.
Action Plan
The DIA, SPY, and QQQ had a much better day with the Bulls stepping up after the gap down open and producing bullish engulfing candle patterns. That is a very good sign but keep in mind; price must follow-through today to confirm. Currently, futures are flat to slightly lower but with the PPI report and so many earnings reports that could easily change.
Currently, the trend is higher except for the poor IWM which just can’t seem to get its act together. In the past, IWM has served as an early warning to future market direction. I would never trade based on that signal but is a reminder not to become complacent in trade planning and risk management. As good as yesterday was take note that the VIX didn’t respond by moving sharply lower but made a small gain. Higher volatility can lead to quick reversals and challenging price action.
Trade Wisley,
Doug
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HDP – Exploded a Few Days Ago Engulfing
HDP – Exploded a few days ago engulfing our big three moving averages and now consolidating. The T-Line has caught up, and the recent lows have tested the T-Line a couple of times. The trend has maintained its bullish direction with the 34-EMA pointing up. With a breakout out of $18.70, we see two swing profit zones. The study of price action can help determine when to sell, add or hold.
Good Trading – Hit and Run Candlesticks
► Members’ Trade Idea Update (ACLS)
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► Eyes On The Market
I love using the T-Line to help determine the moving trend; I also love using the 2 and 3-day charts to filter through the noise. When I use the T-Line, and the 2 or 3-day charts price action and the trend become much more clear. Members know this for clarity. The point is; take a look at at the SPY chart on your computer using the T-Line and the 2 or 3-day chart.
Yes, the Bulls have sat down on the job, but there seems to be enough to keep price afloat. Above $256 the Bulls remain bullish with a normal pullback. Below $256 the 50-SMA will likely get challenged, and that might not be a good thing for the Bulls.
Rick’s trade ideas for the day – MEMBERS ONLY
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Investing and Trading involves significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc. is financial or trading advice. All information is intended for Educational Purposes Only. Terms of Service.
Rick Saddler is not a licensed financial adviser nor does he offer trade recommendations or advice to anyone except for the trading desk of Hit and Run Candlesticks Inc.
No Follow-Through
Longer term the Bulls are still in control but a close look at the short-term and it’s the Bears with a slight upper hand. Last Thursdays mean selloff and rally produced bullish hammer candle patterns, but as now, price, has not been able to follow-through to the upside. The SPY and QQQ have made a nice attempt on Friday but at the end of the day fell just short. As a result, I made no new buys on Friday and took more of a wait and see attitude.
With the VIX rising from historic lows we may experience some choppy price action with nasty whipsaws intra-day. I would be careful not to chase trades (bullish or bearish) at the market open. Stay very focused and flexible with well-planned trades to avoid emotional decisions in the heat of the moment. If by chance the Bears do gain a firmer grip the VIX could spike quickly, and selling could accelerate. That is why I will need to see the Bulls print a candle that breaks the high of the prior day before I add additional long risk.
On the Calendar
The Economic Calendar begins quietly but later in the week is full of important reports. Other than some bond auctions there’s a 2:00 PM Treasury Budget report which is very unlikely to move the market.
On the Earnings Calendar, we are now showing just over 170 reports today. A few noteworthy are FL, BBY, DKS, SFUN, DQ, ANF, WPRT, WUBA, SORL to name a few. Continue to stay on top of reporting dates for companies you own or are considering for purchase.
Action Plan
The Futures market is starting trading last night in the green responding to a huge shopping and spending day in Asia. At about 11:00, however, the bears came back out to play can currently suggest a gap down of more than 40 Dow points. That would mean a gap below Friday’s low on the DIA and make a retest of the Thursday low a possible target. The QQQ has been the strongest of the indexes while the IWM is obviously the weakest.
Overall the index trends in DIA, SPY, and QQQ are still bullish but are continuing to show some signs of stress. The VIX is showing a slight increase in fear, but let’s keep in mind the all the earnings reports in the next couple days anything is possible. A few good reports and Bulls may find their footing for a push higher. A bullish candle that breaks the previous days high is the clue I will be watching hoping to see. However, the Bears will maintain short-term control as long as lower higher candles continue. I suggest a little caution in order and stay very focused on price action for clues. Also, keep in mind with the VIX on the rise choppy price action with quick reversals are possible.
Trade Wisely,
Doug
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Unfortunately, the Bears have decided to be party crashers today with a mean overnight reversal. I have over the last several days suggested raising caution levels and slowing market activity. As there were temptations everywhere in the charts, it was very difficult to maintain discipline. I stuck to my plan, and this morning I’m being rewarded for doing so because I have protected my capital. The VIX will likely see a sharp rise this morning opening the door for some very fast price action. I suggest new or inexperienced traders stand aside as the price action will likely become very challenging. Remember CASH is a position and in times like this can be the very best position!
