Saber rattling intensifies.

As the saber rattling intensifies between the world and North Korea, the US makes moves to cut off the countries money supply.  So once again the market faces an uncertain weekend.  Asian markets reacted lower, but currently, the US Futures markets are trying to shake off the threat.  The Bulls have been incredibly strong, and yesterday the price action began showing a little stress.  Combine an uncertain weekend, with the market at this elevation some profit taking would not be a surprise.  I would also not be that surprised if the Bulls decide to thumb their nose at the threat an rally in defiance.  Stay focused on price action and try not to predict.  The clues will be there if stay focused on price and control our emotions.

On the Calendar

The last business day this week begins and ends with Fed Speakers on the Economic Calendar.  At 9:45 we get the important PMI Composite.  The September PMI consensus composite number expectation is 54.9, and the manufacturing number is coming in at 53.0.   After that, it should be smooth sailing with only a couple of minor reports unlikely to move the market.

On the Earnings Calendar, we have less than 20 reports expected today.

Action Plan

As we head into the weekend the North Korean “Rocket Man” escalated his threating rhetoric.  The news is now suggesting he may detonate a nuclear device over the water soon.  Overnight the futures reacted sharply lower on the news.  Currently, the futures are trying to shake off his latest threat pointing to only a slightly lower open.

Facing another weekend of uncertainty It would not be unreasonable to see some profit-taking.  Yesterday the price action in the major indexes began to show just a little stress.  The DIA is now displaying a Hanging Man pattern followed by a bearish engulfing candle.  Even though it’s a bearish pattern, it only suggests a lower print is possible today.  Stay focused on the price action because it will provide the clues if we allow it to do so.  As you know, I favor taking some profits before the weekend and will not change today.  Have a great weekend everyone!

Trade Wisely,

Doug

7^th Straight DIA Record

After the FOMC volatility, the Bulls demonstrated tremendous strength setting the 7^th straight DIA record.  Equally amazing is that SPY and QQQ’s remain stuck in choppy consolidations while the DIA does all the work.  As a result of yesterdays price action, there is a slight concern in the candle pattern that I describe in the Action Plan section of this post.  The DIA is clearly leading the overall market, but we will soon need to see the SPY and QQQ’s start to participate.  The IWM has made an impressive comeback, but it will be important to see how it deals with the resistance high.  As you know, I love taking profits into strength.  With the weekend nearing I will be thinking about banking some gains especially if the market begins to display any weakness over the next couple days.

On the Calendar

The Thursday Economic Calendar kicks off at 8:30 AM Eastern with the Weekly Jobless Claims.  Due to the impacts of hurricane season, consensus expects claims to increase to 303k today.  Also at 8:30 is the Philly Fed Bus. Outlook Survey which is expected to remain extremely strong with an 18.0 reading this month.  After that, we have lesser reports which are unlikely to move the market such as Housing Price Index and Leading Indicators.  The remainder of the calendar consists of bond announcements and auctions.

There are just over 20 companies reporting on the Earnings Calendar today.  Looking through the list, I don’t see any market-moving reports.

Action Plan

Yesterday I suggested we could see choppy price action ahead of the FOMC and violent price action after.  That turned out to be pretty much spot on, but even I was surprised by the violence of the post-announcement price action.  Ultimately the Bulls won the day with the Dow with it 7^th record-breaking high in as many days.  Unfortuinatually the SPY, QQQ’s and IWM were unable to break out.  With the DIA leading the way and its 9^th day up it left behind a possible Hanging Man Candle Pattern.  I used the word possible because would need a followthrough day to the downside to confirm the signal.  No, follow through, and the candle is just a day of wild price action.  The SPY and the QQQ are also left behind problematic daily candles if today happens to be a down day.

Currently, Dow futures are pointing to a flat to ever so slightly lower open.  With the market ups so strongly I will have a focus on taking some profits particularly if some weakness develops.  We are currently holding some very nice gains, and the last thing we want to do is allow the market to take them away.  Guard against chasing into trades with the market so stretched on the back of the Dow alone.  Only consider entering trades with low-risk at or very near price support levels.

Trade Wisely,

Doug

Interest Rates take center stage.

With the FOMC meeting concluding today interest rates take center stage today.  It is reasonable to expect light volume and choppy price action until the statement is released.  Normally after the statement, the market will react with very fast violent price action.  Whipsaws are very common and wild price action may remain all the way through the Yellen press conference.  Currently, all the overall market is bullish, and I would expect that remain so, but anything is possible after the FOMC.  It would be wise to look over your positions making sure you have a plan.  To simply rely on luck and good fortune is not good business.

On the Calendar

Today is a heavy news day on the Economic Calendar.  Beginning at 10:00 AM Eastern we get a reading on Existing Home Sales.  Forecasters see some improvement rising slightly to 5.480 million despite the Hurricane Harvey.  At 10:30 AM we get the EAI Petroleum Status report which has seen a decline in supplies helping to lift the oil industry slightly.  Let’s hope that trend continues to support these beleaguered stocks.  After that it all about the FOMC and Janet Yellen.  At 2:00 PM is the FOMC Announcement as well as the FOMC Forecasts followed by the Fed Chairs Press Conference at 2:30 PM.

On the Earnings Calendar, there are only 14 companies expected to report today.  Let’s hope all report better than companies that reported yesterday.

Action Plan

The DIA which is now up eight days in a row again set a new record closing high.  The QQQ’s and the SPY were both unable to break out a remained choppy as we were expecting due to the FOMC meeting.  The IWM also closed at exactly the same price as the day before but still trying to test the-the July highs.  Overall the indexes remain in a bullish trend thus I will continue to look for long trades taking advantage of the rising tide.

Futures are pointing to flat open this morning, and I would not be surprised to see light volume chop right up until the FOMC announcement.  Anything is possible after the statement is released and the market reacts.  Expect fast whipsaws and violent price action to occur.  I doubt very much I will add any new risk until I see how the market is responding to the FOMC news.  Please remember anything is possible and all traders should have a plan to protect profits and capital.

Trade Wisely,

Doug

FOMC Meeting Begins Today

The Bulls gave a very strong performance yesterday pushing the DIA once again to new record highs.  A major influence in the rally was the strength shown in the financial sector ahead of the FOMC.  The FOMC meeting begins today with the odds of an interest rate increase in December now above 60%.  The market will be heavily focused on their statement tomorrow afternoon, and as such we could see some choppy price action as we wait.  The rally is now 7-days old so it would be normal to see the market take a little rest or even experience a light volume pullback.

On the Calendar

The Tuesday Economic Calendar begins with Housing Starts at 8:30 AM Eastern.  Forecasters are expecting a rise in August 1.173 annualized rate vs. 1.155 in July.  Housing permits are expected to decline from 1.220 million vs. 1.223.  Also at 10:00 AM is the less important Import Export Prices.  Consensus has Import prices rising to 0.4% and Export prices falling by 0.2%,  Of course, the big news on the calendar is that the FOMC begins their 2-day meeting with the announcement scheduled at 2 PM Eastern on Wednesday.

On the Earnings Calendar, w have just short of 20 companies reporting earnings today.  The most notable today is ADBE, FDX, AZO, BBBY, and CPRT.  Of those only BBBY reports before the bell while we will have to wait until after the close for the others.

Acton Plan

Once again the futures are pointing to a positive open today.  The DIA and IWM both closed yesterday holding up quite strongly with the QQQ’s, and SPY struggled to hold the morning bullishness.  With the FOMC beginning their meeting today it would not be surprising to see the market become choppy as it waits for their decision.  There could also be some market tremors depending on the news out of the UN as Trump call for further action against North Korea today.

The overall trend of the market remains bullish, and as such I will look for new long trades.  However, I do want to acknowledge that the run sharply higher the last seven trading days and rest or pullback are not out of the question.  The last thing I want to do is to become overly long when the market is at new highs after such a strong run-up.

Trade Wisely,

Doug