Political Drama
Yesterday the Tax Reform bill appeared to be a slam dunk and a vote to was expected to happen at any time. I mentioned yesterday the next couple weeks could be bumpy as all the political drama unfolds. Last nights delay has the Washington spin machine at high speed with both sides churning out more and more dramatic rhetoric. Listen closely, and you can hear the dramatic music reaching a crescendo. One side vows to save the day while the other promises to fight to the death because of horror this bill will bring. Blah, Blah Blah! Unfortunately, the stock market is directly in the line of fire. Traders should be very cautious. Violent price shifts are possible in either direction so plan your risk accordingly.
On the Calendar
Friday’s Economic Calendar has several important reports this morning, but before that happens, we will hear from two Fed Speakers. Bullard speaks at 9:05 AM and Kaplin at 9:30. The PMI Manufacturing Index is at 9:45 AM and forecasters expect a very strong 54.5 print today. At 10:00 AM the IWM Mfg. Index has topped consensus several weeks in a row. However, the forecasters today call for a slight pullback to 58.4 vs. 58.7 last month. Construction Spending is also at 10:00 with the October’s consensus increase at 0.5% due to strength in single-family home building. And then who would have guessed we will hear from yet another Fed speaker at 10:15 AM.
On the Earnings Calendar, we only have 18 companies reporting today none of which are particularly notable.
Action Plan
The promise of Tax Reform spurred the bulls into a full-on stampede yesterday as traders seemed to buy stocks with both hands. The Dow smash through 24,000 finally coming to rest up a whopping 331 points on massive volume. It’s also interesting to note that the VIX also rallied suggesting fear at this evaluation is growing. OPEC’s decision to extend their production reduction program also played a part in pushing the market higher. Oil companies surged higher on the news.
This morning futures are looking lower because the Tax Reform bill suddenly seems to have lost votes. The Senate now says the vote could happen today, but they are scrambling to rewrite provisions of the bill on the fly. I repeated over and over yesterday in the trading room a warning to not chase this rally. Those that did could have a tough lesson learned today. If by chance they fail to get this bill passed we could experience a very dark in the market.
Trade wisely,
Doug
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Charts Have Been Mean And Green
Wow, what a great week this has been, the charts have been mean and GREEN, and we love GREEN. Hey, thanks to all the members for posting and sharing the great charts. I see the morning futures are a looking a bit weak this morning, let’s keep our eye on the ball and the trend, using a couple of support and resistant lines can make all the difference in the world.
The DC politics is something I dislike, but we have to keep our eyes and ears open on whats going on and trade the charts based on the charts, not hopes and dreams.
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►Sample • Members Recent Big Winners
EGLT 16.8% • WIN 28.9% • HOV 24.45% • ZUMZ 30% • URBN 21.20% • ARNA 21.5
► Eyes On The Market
In the past 11 bars, the SPY has gone from below the Lower T-Line and with a Bullish Morning Star price ran nearly 3.8%. All of our moving trend lines are still bullish. Price has gotten a bit overzealous and extended. I believe we are very close to seeing a little correction or at least price needs to be taken down a notch or two.
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.
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Gap Back In October and Consolidated
RIGL – Gapped back in October and had consolidated for the past two months. The 34-EMA has caught up with the price. A few days ago price popped and is now seeing a little profit taking. The weekly chart shows good strong support and a Bullish Morning Star signal. You can also see the Bullish “W” pattern. I see a leg or 2 putting price around $7.00 with plenty of swing zones in between.
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► Must Read • Trade Update (VIAB)
On November 20 we shared and covered in detail the technical properties of VIAB in the Trading Room, Yesterday the profits were about 8.7% or $227.00, with 100 shares. VIAB broke of a Bullish J-Hook continuation pattern within a Rounded Bottom Breakout setup.
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► Eyes On The Market
I had a few concerns going into the close yesterday with the QQQ’s and SMA getting crushed, and I am still very concerned. This morning the futures a bit positive and the Transports (IYT) smacked the cover off the ball yesterday. Overall I am still Bullish because the price of the SPY, IYT, and DIA are still trending above the T-Lines. Following price on the 1, 2, and three-day charts and how price interacts with all 3 of the T-Lines has had a positive impact on myself and the members of Hit and Run Candlesticks and Right Way Options.
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Learn how and what we trade: The T-Line • T-Line Bands • Support • Resistance • Buy Box • Volatility Stops • Price Action • Candlesticks • Profit Zones • Entry Zones • Protective Stops
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.
Washington DC Spin
The US Senate is now the top focus of the market as the Tax Reform bill head to the floor for debate. According to reports, a vote could come before the end of business Friday. In my opinion, there is never a more dangerous time in the market then when Politicians, rhetoric and the Washington DC Spin machine is in control. Anything is possible, and high volatility and big intra-day swings can occur. Also, keep in mind that even after the Tax Reform dog and pony show is over we still face a Federal Government shutdown in early December. Who knows what kind of political drama that could create. I suggest if you do trade then trade small and stay on your toes because the price could be very bumpy the next couple weeks.
On the Calendar
The Thursday Economic Calendar begins at 8:30 AM Eastern with two important reports. First, the consensus for the Jobless Claims number this week is 240K vs. 239K on the previous reading. If not for the impacts of Puerto Rico Jobless Claims would be at or near historic lows. Second, is the Personal Income and Outlays report. Personal Income is see rising 0.3% while consumer spending could slow slightly to 0.3%. The Core index expects a 0.2% increase for a yearly rate fo 1.4%. Also at 8:30 AM we have a Fed Speaker and then another at 1:00 PM to pontificate on interest rates. At 9:45 AM is the Chicago PMI which forecasters are calling for a decline to 63.5 vs. 65.2.
On the Earnings Calendar, we have 38 companies reporting. Please continue to check current holdings as well as those you are considering for purchase for reporting dates. Just a few seconds of effort can save you from significant losses if a company reports poorly.
Acton Plan
Yesterday’s price action left behind patterns of uncertainty in the DIA, SPY, and IWM. The QQQ’s on the other hand, reminded us that the bears still exist and their teeth are very sharp! Many trends in the Tech sector broke down yesterday, and there are reversal patterns galore. As bad as it was, please remember it’s not the first move lower that matters. A failure to make a new high after it bounces is where the real selling could begin. The sky is not falling.
New out of Washington that the Senate voted mover the Tax Reform bill forward to floor debate has fired up the Futures this morning. Currently, the Dow futures are suggesting a large gap up at the open. Remember gaps to new market highs can create whipsaw price action producing fast intraday reversals. Be careful not chase and get caught up in the morning drama. A vote to pass the Tax bill could happen within the next 24 to 48 hours. If it happened to fail; well, use your imagination.
Trade Wisely,
Doug
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Tax Reform
With the Tax Reform bill looking as if it will pass, markets thumbed their nose at North Korea. Who would have guessed that money trumps a threat of nuclear attack? With all this going one would have expected the VIX the have gone wild. Oddly enough the VIX barely moved the entire day! Futures markets want the party to continue this morning with Dow pointing to a gap up around 70 points. Anyone caught holding short positions yesterday got completely run over by stampeding bulls. A very good reminder that shoring an up-trending market is an unwise business decision. Stay with the trend but avoid the temptation to chase and consider taking profits into strength.
On the Calendar
The Economic Calendar starts off with the very important GDP report at 8:30 AM eastern. The 2nd estimate for the 3rd-quarter GDP is expected to come in higher at 3.3 vs. the 3.0 on the first reading. Oddly enough consumer spending is expected have nearly paused, up from 2.4% to only 2.5%. The overall GDP Pirce index is expected to remain unchanged at 2.2%. Janet Yellen speaks at 10:00 AM while the Pending Home Sales Index reports. Consensus expects a sharp rise of 1.0% in October pending home sales. At 10:30 AM is the EIA Petroleum Status report which they don’t estimate forward, but a recent pipeline problem may have decreased stockpiles. There is another Fed speaker at 1:50 PM followed by the Beige Book at 2:00.
On the Earnings Calendar, I see 49 companies reporting results today. TIF is one of the companies reports before the bell while LZB, HOME, JACK, and WDAY are among those reporting after the bell.
Action Plan
All four major indexes ignored the threat of a North Korean nuclear attack setting new record highs across the board. Amazing and just a little spooky is the fact that the VIX barely moved yesterday in response to such a strong rally. Very odd. Even the IWM pitched in yesterday showing nice energy as it reacted higher from price support. Logic would suggest after such a big move the market would take a rest, but currently, futures are pointing to a gap up of nearly 70 points! The surge in bullishness seems to be the direct result of the Tax Reform bill looking as if it will pass.
Thank goodness we stuck to our rules and continued to trade with the trend because we were nicely rewarded yesterday. Continue to trade long but please avoid chasing as this kind of wild bullishness can suddenly find profit takers. Remember the rule, take profits into strength!
Trade Wisley,
Doug
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