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

Piles of uncertainty surround the market.

Even as the morning futures pump up team continues to try and inspire buyers to jump in piles of uncertainty surround the market.  From budget wrangling in D.C., Hurricane threats and a nut job with his finger on a nuclear button the market has a full plate.  I think we can expect some very fast moves in the market as these events unfold in our 24-hour news cycle.  Even a slight improvement in the track of Irma could inspire the Bulls just back in but if projects remain the same the opposite could be true.  The Governor of Florida as order evacuations due to this historic storm.  If I were governor of the market, I would order a temporary evacuation of the market for all inexperienced traders.  Please protect yourself until at least some of the uncertainty passes.

On the Calendar

Thursday’s Economic Calendar begins with the weekly Jobless Claims at 8:30 AM Eastern.  The expectation for this week is only slightly higher at 241K vs. 236K.  However, as the effects of Hurricane Harvey tally up this number could start moving up quickly.  Productivity and Costs also report at 8:30 AM which sees productivity rising 1.3% and labor costs edging higher by 0.3%.  At 11:00 AM we get the EIA Petroleum Status Report.  I would expect to show a decline in supplies even though it is unlikely to include the full effects of Harvey will likely not show up just yet.  We have a three Fed Speakers today, a few on-market moving reports and slew of bond announcements rounding out the calendar day.

On the Earnings Calendar 60 companies are expected to report today so stay on your toes and continue your due diligence.

Action Plan

Although we managed to bounce small bounce in the morning, the market remained mostly stuck in a very narrow range chop.  During the evening the futures were mostly lower, but the market pump up team has been hard at work.  Currently, the futures are pointing to a flat open, but that may be difficult to matain with the market facing so much uncertainty.

The DIA, SPY and the QQQ’s all remain above their 50-day averages, but price action is not exactly inspiring confidence.  I would rank the QQQ’s a the strongest of the indexes and IWM as the weakest which is once again below the 5- day average.  As more and more reports come in on Hurricane Irma, the chances that Florida will take a direct hit seem to grow.  Following this historic storm is another Hurricane named Jose that is growing in strength.  Add in the budget games playing out in D.C. and the growing tensions with North Korea, and it’s understandable that the market nerves are wearing thin.  Expect volatility with fast moves possible as news of these events unfold.  I recommend extreme caution and would suggest new or inexperienced trader simply wait for a bit more stability.

Trade Wisely,

Doug

The Bears delivered technical damage.

Although the bears delivered technical damage to the index charts overall supports held as did overall trends.  Ugly, yes but not a game changer as of now.  The emotional and psychological damage may turn out to be the most important damage created yesterday.  After getting their hands slapped several times trying to reach out for new highs, the Bulls may be a little hesitant to try it again without a little rest.  On the other side, the Bears may have become a bit more emboldened seeing an opportunity to test lower levels.  With all the uncertainty surrounding Noth Korea and Hurricane Irma swirling off the coast of Florida I think should plan for an extra dose of volatility.

On the Calendar

We get going this Wednesday on the Economic Calendar with International Trade at 8:30 AM Eastern.  Forecasters see this most important number of the day widening the trade gap to $44.6 billion vs. $43.6 on the last reading.   At 9:45 AM PMI Services which is the least important number of the day, but forecasters expect it to hold at a strong 56.9 level.  At 10:00 AM we get a reading on ISM Non-Mfg Index.  ISM issued a surprise drop in the index as growth in new orders declined.  However, forecasters expect a bounce back this month to 55.8 vs. 53.9.  The Federal Beige Book rounds out the calendar at 2:00 PM.  It is very unlikely for this report to move the market as a general rule.

It is still important to stay on top of your portfolio management with about 50 companies expected to report earnings today.  Don’t rely on luck, be prepared with a  plan.

Action Plan

Yesterday the uncertainty of North Korea was ramped up as the path of hurricane Irma now has the Florida coast in its path.  Irma has become one the strongest storms ever recorded in at see with sustained winds of 180 MHP.  Currently, it’s Category 5 storm with current projections that it still be a Cat. 4 by the time it makes landfall this weekend.  Of course, it could change course, but as of now, the uncertainty is not helping the market at all!

As bad as yesterdays move was an objective look at the index charts show that the DIA, QQQ, and the SPY remain above the 50-SMA.  They are also still in an overall uptrend, so I see yesterday as a warning shot across the bow but not a game changer just yet.  Having said that yesterday left behind some technical damage that may take some time to repair.  The big bearish candle left behind suggests will likely see a lower low in the near future.  Because of the very short term oversold look of yesterdays move a bounce, or at a minimum, resting seems possible this morning.   The VIX experienced a big spike up yesterday so we can expect some additional volatility.  I suggest it would be wise to exercise additional caution.  New or inexperienced traders should stand aside or perhaps practice in a paper account rather than engage in this battle.

Trade Wisely,

Doug

Uncertainty and Volatility

We have an up trending market that displayed a lot of bullish price action last week.  On the other hand, we have a North Korean leader playing with nukes and acting like he wants to pick a fight.  Mix in a President that has a Twitter account, that he’s not afraid to use and we end up with a lot of uncertainty right at the market highs.  Uncertainty and volatility are the likely results.  All weekend I have seen people trying to predict what happens next.  Some are claiming the market will ignore North Korea and we are going to the up.  I saw one ridiculous prediction that the Dow was going to 50,000.

Then there are the Gloom and Doomers predicting that the end is near and the market is destined to collapse.  Run for the hills!  There are others that suggest the market is setting a trading range that it could be in for years.  For what it worth I think predicting is a waste of time.  Predicting creates a bias, and bias can blind you to the clues that price is providing.  Predicting the market is a lot like trying to rope the wind.  It’s a lot of effort for nothing.  Focus on price and follow it when it shows a direction.

On the Calendar

This short week Economic Calendar begins and pretty much ends with Factory Orders at 10:00 AM Eastern.  Forecasters see a decline in Factory Orders of 3.1%  even though most of the underlying data would suggest strength.  An interesting discrepancy but the Factory Orders number is normally not expected to move the market substantially.  We have three Fed Speakers today and some bond auctions to round out today’s calendar.

There are on quite 30 companies on the Earnings Calendar today.  A quick look through them and I don’t see any market moving reports.  However, if you happen to hold a company that surprises you with a report because you failed to check it can be very damaging to your account.  Make sure always to check and be prepared with a plan around an earnings date.

Action Plan

Friday price left us with a little indecision while it rested ahead of the 3-day weekend.  This morning we have a bit of a conundrum.  Markets displayed incredible bullishness in the rally off the lows last week.  Both the QQQ’s and the SPY managed to break out while the DIA and IWM still have work to do.  Toss in the very risky game the North Korean leader is playing, and we end up with with a big pile of uncertainty.  I would like to think cooler heads will eventually prevail but the market hates uncertainty.  Dow futures are pointing to a gap down of more than 60 points at the open.  If the Bears take over, we could see failure patterns develop at market highs.  Not good!  If the Bulls step up to the plate and defend, we could strength in the rally.

The big question is, are you willing to speculate that you know the direction and willing to risk capital?  For me, the answer is no.  I will stand aside from entering new trades until price shows me clues of direction and then I will follow the winning team with higher probability trades.  We don’t have to take every day to be successful traders.  Also, we don’t have to pick exact tops and bottoms to be profitable.

Trade Wisely,

Doug