The Bull/Bear battleground.

The Bulls have been impressive rallying back up to test market highs however they seemed to lose considerable energy near the close.  With the futures looking lower this morning the Bears are showing their teeth and willingness to fight.  With definitive support and resistance levels on the DIA, SPY, and QQQ’s the Bull/Bear battleground as been established.  I suggest staying very focused on price action.  Trend and momentum currently favor the Bulls, but last week we saw how quickly that edge could fade away.  I am raising my caution levels and will restrict my market activity.  No matter which team wins this battle I will be ready to ride their coat tails when price action clues of the winner begin to emerge.

On the Calendar

The Economic Calendar for Thursday begins with the weekly Jobless Claims at 8:30 AM Eastern.  Labor continues to hold very strong this year, and forecasters see that continuing with a 240K print today.  Also at 8:30 AM is the Philly Fed Business Survey.  The July report only showed marginal strength at 19.5 vs. the 17.0 consensus for today.  At 9:30 AM we get a reading on Industrial Production which is expected to rise 0.3% with capacity utilization edging up to 76.7%.  Other than that we have Fed speakers at 1:00 and 1:45 PM and few non-market-moving reports mixed in for good measure.

There are just over 50 companies reporting earning today, so please stay on your toes checking your holding and those you are considering for new trades.  A couple to make a note of are the reports from BABA and WMT which both happen before the bell today.

Action Plan

Before the FOMC Minutes, the market was finally seeing some follow-through buying after the morning futures pump.  However, after the report, weakness showed up in the indexes selling off to near the opening prints.   The DIA, SPY, and QQQ’s all remained under resistance leaving behind indecisive candle patterns once again opening the door for reversal.  Currently, futures are pointing to a slightly lower open that require our attention.  If it turns out to only be a rest near the highs, perfect, but if the Bears go to work here then trouble could be just around the corner.

Over all the trend continues to be up but I think it’s wise to raise your caution level as we dance around the market highs.  Reversals can happen very quickly near market highs, and although 3 of 4 major indexes are holding up well, IWM is down-trending raising some questions.  As a result, I will likely curtail my trading activity slightly and will be prepared to take profits ahead of the weekend.

Trade Wisely,

Doug

Morning gaps but no follow-through action.

So far this week the pros have pumped up the premarket in the futures gapping the market higher.  There is nothing wrong with that as long as we see some follow-through buying after the open.  However, the last two days have only seen chop after the open making it frustrating and challenging for most traders.  I have been warning each day to avoid chasing the gap and getting caught up in morning drama.

With the futures pointing to another gap up today, I will risk sounding like a broken record and repeat the same words of caution.  Keep in mind FOMC Minutes come out this afternoon.  It would not be a surprise if the market waits for choppy price action before the report.  After the minutes are released expect an extra dose of volatility with quick whipsaw action.

On the Calendar

We have three potential market moving reports on the Economic Calendar today.  At 8:30 AM Eastern it kicks off with Housing Starts which were weak in both April and May but bounced back in May.  Forecasters expect to see another increase today to 1.225 million annualized rate.  At 10:30 AM we get the EIA Petroleum Status Report.  Last reading broke a downtrend in oil supplies with a surprise build squashing the recovery that had begun in the sector.  Let’s cross our fingers and hope for a decline in supplies today helping to support the overall market.  The always anticipated FOMC Minutes will come out at 2:00 PM.  Normally the market would see light volume and choppy price action ahead of the number, but there is nothing normal about the current market.

On the Earnings Calendar, we have over 40 companies reporting today.  Retailers happen to be in focus with TGT reporting before the open today.

Action Plan

Our all or nothing market continues to gap higher at the open, but so far this week, there has been little to no follow through the rest of the day.  There is movement in some individual stocks but to have a little luck and be very quick to gain much benefit.  Currently, the futures are pointing to yet another gap up, but as now a breakout to new price levels has not occurred.  If you find yourself frustrated, you are not alone!  With out question, current price action has been very challenging with little to no edge for retail traders.

With another professional gap this morning I am once again forced to wait for clues that real buyers are willing to support current prices of the overall market.  The gaps on both Monday and Tuesday were met with chop the rest of the day.  Perhaps today will be different but with the FOMC minutes coming out this afternoon could once again create the conditions for more chop after the gap.  The trend is up so if I do trade it will be long.

Trade Wisely,

Doug

Will resistance hold or break?

Yesterday’s bullish move looks as if it will be followed by another gap up bring the both SPY, QQQ’s right back to last weeks resistance.  The question is, will resistance hold, stopping the Bulls advance or will it break?  To say the least, this kind of price action is tough to trade, and what makes it worse it’s dripping with emotion and drama.  There is an old saying that, Fortune favors the bold.  For some that’s true, but history rarely writes catchy sayings for those that lost their heads during their bold attempts.  Keep in mind it’s not necessary to trade every day to be successful.  Choose your battles wisely.

On the Calendar

We begin Tuesday with the biggest report of the day on the Economic Calendar at 8:30 AM Eastern.  Retail Sales number have disappointed all year but today consensus expectations for today are looking for a 0.3% vs. the 0.2% decline last reading.  Also at 8:30 we will hear from the Empire State Mfg. Survey and Import/Export Prices.  Consensus for the manufacturing number is to remain steady at 9.8. Import/Export prices are expected to increase by 0.1% vs. the 2% decline last month.  At 10:00 AM both Business Inventories and Housing Market Index release results.  Forecasters are calling for 0.4% gain in June for Business Inventories and a 65 reading in the Housing Index.  The Treasury International Capital number rounds out the day at 4:00 PM.

On the Earning Calendar, there are more than 30 companies reporting today.  Retail numbers will be the theme most of this week.  Home Depot reported very early this morning beating both the top and bottom line as same store sales increased, but as of now, investors seem unimpressed.

Action Plan

The Bulls made a strong showing yesterday gapping the market higher and managing to hold it above the gap all day.  Currently, it would seem the Bulls would like a repeat performance with the Dow futures suggesting another gap up of nearly 50 points.  That brings the SPY and the QQQ’s right back up into the congestion zone they were having trouble with as the Dow pushed higher just a week ago.  If you’re confused as to what to do, you’re not alone.  Price action such of this is very difficult to trade.  Traders that step in boldly might get richly rewarded however they may just as easily punished for chasing into price resistance.  Tough decisions to be sure.

Over all trends continue to be up so to follow my rules and trade with the direction of the market I will be looking for long trades.  However, I will not rush in after another gap.  I will wait and watch and enter only if the timing is right and the price action confirms.

Trade Wisely,

Doug