Bulls are large and in charge.

I guess there is nothing quite like 2 of the most damaging storms in history to inspire the Bulls to run.  The theory is these storms will open the flood doors of Federal Spending for the cleanup and rebuilding.  All the rebuilding will also create big boosts in material and durable goods to rebuild the lives of those affected.  If there is one thing, the market loves its massive government spending no matter future consequences.  The Bulls are once again pushing for higher prints this morning with the futures pointing to a gap up of nearly 50 points in the Dow.  Clearly, the Bulls are large and in charge, but I would caution you about chasing.  If you missed this move then just let it happen.  Eventually, the market will rest or pull back providing lower risk entries rather than chasing an already overextended move.

On the Calendar

Another light day on the Economic Calendar with a single report of significance and several bond auctions.  At 10:00 AM we get the JOLTS report which tracks job openings.  Job openings have remained strong @ 6.163 million. However, hires have lagged behind at 5.356 million pointing to a tight labor market.  The consensus is expecting a slight pullback in offerings to 6.010 million in today’s report.

The Earnings Calendar has 27 companies expected to report today.  Overshadoweding earnings today is the unveiling of the highly anticipated Apple iPhone 8 at 10:00 AM Pacific Time.   Analysts expect this phone will finally contain major innovations.  Apple product release events in the past have moved the market so if this is a game changing device it could have a positive effect on price action.  On the other hand, if the company disappoints the opposite is also possible.

Action Plan

What’s the right move after the Dow rallies nearly 300 points in a single day followed by a gap higher the following day?  I won’t assume that I know what’s right for you, but I know for me it means to focus on profit taking rather than adding new risk.  Wild bullishness like this creates a lot of emotions.   The feeling of missing out causes a lot of traders to chase in just before the pullback.  Let’s be very clear here if you were not holding long positions last Friday then you have already missed it this move.  Jumping in today would be a very bad idea.  Wait for the market to rest or pullback and then enter at or near support rather than chasing and buying at price resistance.

Please understand I am not saying that the market can’t continue going higher before it pulls back.  It definitely can, but that is not a good reason to blindly follow like sheep.  A rest or a pullback will occur, and it will provide a better risk/reward trade.   Plan your trades careful and have defensible positions that fit your risk tolerance.

Trade Wisely,

Doug

The Bulls Stampede Upward

With hurricane Irma, continuing to create damage in Florida the Bulls stampede upward.  I guess the market wants to pick up the pieces and tally the costs later.  If you ever had a question as to whether the market has a concern for people, then clearly that answer is No!  The futures gap up this morning has the potential of creating whipsaw price action so plan accordingly.  Let’s also not forget the poison pill running around in North Korea.  I doubt our days of high volatility of over just yet.  Big moves like this create a lot of emotion.  Guard yourself by planning your trades carefully.  I can tell you chasing the market with the feeling I was missing out ended up costing a lot of money over the years.  Wait, plan, maintain your rules because that is where your edge lies.

On the Calendar

A very light Economic Calendar today with only one bill announcement and three bond auctions.

The Earnings Calendar is also very light with only 17 companies reporting result today.  A quick scan through them and I see nothing that would be market moving.

Action Plan

The last three days of market price action was nothing more than light volume chop in the indexes.  However, there were a remarkable number of good-looking charts and setups.  DIA, SPY, and QQQ are all successfully held important levels while IWM remained below the 50-SMA.  With North Korea remained quiet over the weekend the futures are pointing to an unbelievably strong open today.  As Irma continues to move through Florida leaving behind untold billions in damage in its wake, I’m honestly shocked by the market reaction.

Perhaps the market believed it was going to be much worse.  Over the long haul, the hurricane’s damage will likely boost the economy with all the rebuilding efforts and materials consumption.  The Dow is looking to gap up more than 100 points retail traders have a difficult decision to make.  Do they chase in risking potential whipsaws or do they wait for some of this emotion to subside.  Please keep in mind North Korea could upset the apple cart in about half a heart beat once again reversing the market.  It’s easy to forget that when we are looking at a 100 point gap.

As for me, I will continue to trade with the up trend, but I refuse to chase a gap near market highs.  The RWO portfolio has several long trades that should benefit from this gap up, so there is no need to chase.  Don’t get caught up in the emotion.  Wait for proper low-risk entries that fit your risk tolerance.  That way if the market does turn, your risk is manageable.  Make sure to plan each trade carefully.  If the market has decided it’s going to breakout to new highs, there will be more good entries than we could trade.  There is no need to rush.

Trade Wisley,

Doug

A weekend of uncertainty ahead.

As the market rallied at the end of the day yesterday, the temptation to add some positions was strong.  After all, there are so many good looking charts showing up, right!  But then I began to think about the weekend of uncertainty ahead and resisted the temptation.  Looking at the futures this morning pointing to sizeable gap down this morning the late day rally is looking more like a Bull trap.  After thinking it through, I am happy to have my account hedged with some DIA puts.  RWO members are holding some nice gains as the weekend approaches it would be wise to think about profits rather than adding new risk.  With all the uncertainty surrounding the market, we can rest well knowing the market will open again on Monday with loads of profit potential.

On the Calendar

The Friday Economic Calendar is giving us break with no market moving reports expected.  Before the market opens at 8:45 AM Eastern we have a Fed Speaker pontificating on interest rates.   At 10:00 AM there is a report from Wholesale Trade which forecasters see a rise in inventories.  We have the Oil Rig Count at 1:00 PM and Consumer Credit at 3:00 PM.  Unless there is some major surprise, none of the reports today are likely to move the market.

The Earnings Calendar is also very light today with only 15 companies expected to report this Friday.  A quick look through them I don’t see anything that would be market moving.  That, however, does not excuse you from checking them against your current holdings.  Relying on luck isn’t a wise way to manage your trading business.

Action Plan

The choppiness of the last couple days has been frustrating.  The Bulls and Bears have pretty much battled to a stalemate.  At the end of the day yesterday it looked like the Bulls were gaining an edge and I found myself wanting to predict the market was ready to move higher.  After all, there are a lot of very good looking charts in my qualified lists.  Finally, experience kicked in, and I started to consider the weekend ahead and all of the uncertainty facing the market.

As of now, the projections on Hurricane Irma could not be worse as this massive storm has the entire state of Florida targeted.  It’s hard to imagine, but if current projections are correct, Irma will affect the entire peninsula coast to coast.  The potential damage and economic disruption are truly staggering.  Then we have that pie-faced dictator with a bad haircut who loves spreading hate and discontent.  So as much as I would like to start buying up stocks my common sense is telling me to wait.  The market will be here Monday, and there is no need for me to be the first sheep through the gate.  If the Bulls do step in, there will more than enough opportunity to profit.

Trade Wisely,

Doug