Price action indicates the Bulls are firmly in control.

Price action clearly shows that the Bulls are large and in charge.  Not only did the step in defending price support but they smashed through the ceiling setting new records.  On this profit taking Friday, I plan to do some selling into this strength and going to the bank ahead of the weekend.  Futures are suggesting a strong gap up this morning so be watchful of whipsaws that are common at price highs.  As a personal note, I am still very concerned about the potential effect of complacently with the VIX near historic lows.  Although I will be taking long, I will also be on guard and prepared if this wildly bullish enthusiasm happens to reach an exhaustion point.

On the Calendar

Normally I would say this morning we finally get the number the market has been waiting for, The Employment Situation report.  However, the market seems to be waiting for nothing with the stellar performance of the Bulls yesterday, and the huge gap up the futures are expecting this morning.  None the less the 8:30 AM Eastern Employment Situation number is a critical indicator of economic health.  Consensus suggests another very strong number of 185K jobs created and the unemployment holding at historic lows of 4.4%.  In focus today will be the average hourly earnings which can provide clues to inflation.  Forecasters say inflation is not on the rise expecting the hourly earnings to remain week at 0.3%.

International Trade also comes out at 8:30 AM and is expected to show the trade gap widened sharply in April which would be an economic negative.  Also on the docket are two Fed speakers to round out this big week of data.  We have a very light Earnings Calendar today with only six companies expected to report earnings.

Action Plan

The Bulls are in control and appear to be wildly strong pushing the DIA to a new closing record high while the SPY and the QQQ once again broke to new records.  Remaining a bullish and staying with the overall trend of the market has once again proven to be profitable.  Having said that this no fear market still gives me the willies!  I will continue to trade long but because I do fear complacency I will remain laser focused on price action for clues of trouble.  My job is to follow price not predict so that I will do exactly that.  Friday is profit day, and I do plan on taking advantage of the strength of the market and take profits ahead of the weekend.

Trade Wisely,

Doug

End of Day Rally Inspires Cautious Optimism

The end of day rally yesterday was nice to see as the Bulls continue to defend price support.  There are many that will point to the hammer candle patterns as signs of bullishness, and they could very well be correct.  However, let’s not forget that the same candle pattern can also ba a Hanging Man because of its placement near all-time highs.  Personally, I want to be optimistic that the Bulls are ready to push higher, but I must continue to prepare for the potential reversals.  Remember price swings can happen very quickly at or near potential tops.  Intraday whipsaw price action is common as highs are tested so it’s wise to be ready for additional volatility when planning new positions.

On the Calendar

Today is a busy Economic Calendar with reports that do have the ability of move the market.  It starts off with the ADP Employment Report at 8:15 Am Eastern.  The ADP number last month missed the mark calling for more jobs growth than actually showed up.  Today they the number is expected to be between 170k to 177K jobs created.  At 8:30 AM we receive the weekly jobless claims which have been tracking at 40-year lows.  The PMI Manufacturing Index comes out at 9:45 AM.  PMI is expected to come in with a very strong reading of 53.0 this month.

One of the heavy hitters this morning is the ISM MFG Index number at 10:00 AM.  Consensus suggests the ISM will come in steady and strong with a reading around 54.6.  Construction Spending numbers also at 10:00 AM have been tracking flat this year, but today forecasters are expecting an improvement.  Last but not least is the very important Oil Status Report.  If we want the market to continue marching higher, we will need some help from declining surplus supplies.  There are 45 companies are expected to report earnings today.

Action Plan

The end of day rally yesterday was inspiring but fell just short of providing bullish confidence.  I will approach the market today with some cautious optimism.  Futures are currently flat, but with all the morning economic reports quick price swings will be possible.  We must also keep in mind that the market may decide to simply wait for the Employment Situation number.

Trade Wisely,

Doug

Price action indicates fear of reversal is extremely low.

Although price action yesterday lacked energy it continues to suggest there is no fear.  QQQ’s continued to dominate holding up all the other indexes and marking out yet another record high.  VIX the so-called fear index is once again testing prices near historic lows.  Overall market trends remain bullish, so I will continue to seek long positions but want to guard against complacency.  Always be mindful around market highs that reversals are possible and can develop swiftly.  Maintain focus on price action and be prepared to act no matter the direction avoiding personal bias.

On the Calendar

The hump day Economic Calendar starts will the Chicago PMI at 9:45 AM Eastern followed shortly after by Pending Home Sales at 10:00 AM.  The Chicago PMI has been tracking strongly above the mid-50’s for several months in a row.  Although consensus is expecting a slight pullback this month, the should remain over 57 suggesting economic strength.  The Pending Home Sales Index fell last month, but forecasters are expecting a rebound this month.

This afternoon at 2:00 PM Eastern we get another reading of the Federal Beige Book.  We will also hear from two Fed speakers today.  One at 8:00 AM and the other well after the market close at 7:30 PM.  On the Earnings Calendar, there are 40 companies expected to report today.  Although there is no market-moving earnings report, it is still important to continue checking before entering new trades and managing existing positions.

Action Plan

Yesterday’s light price action was as expected, but there was notable strength in several tech sector stocks.  QQQ, once again claimed new record highs while the other indexes lagged behind on anemic volume.  Futures has fluctuated this morning between negative and positive readings.  I am hoping to see slightly more energy today but will continue to be very picky until I see buyers actively stepping in at these levels.  I will continue to remain bullish if the uptrend continues to hold.

Keep in mind that with all the data points building toward the big Employment Situation report on Friday, that light volume choppiness is possible.  Although I want to trade with the direction of the market, I want to be mindful not get overly long until we see price action proof that new support levels have buyers defending them.

Trade Wisely,

Doug

Sell in May and go away? Not so much!

This year those that followed the old axiom, “Sell in May and go away”; missed out on big time.  Fear of a sell remains at near record lows, and it seems even the smallest selloffs attract dip, buyers.  Nothing about this year has so far has qualified as normal.  As a result, we must remain very focused on price action clues and prepared for anything.  That means don’t become complacent thinking that the market it too strong to sell off because that is a mistake that can remove all your profits for the year very quickly.  If buyers continue to show strength at these levels, we must also be ready to act.

With no major news events over the holiday, I would expect a light volume day as many traders will have planned extended vacations.

On the Calendar

Although this is a short week, the Economic Calendar is full of very big reports.  It kicks off the today with Personal Income and Outlays at 8:30 AM Eastern.  Consumer is spending is expected to see an improvement over last month, but consensus suggests personal income will remain soft.  At 9:00 AM we get the S&P Case-Shiller numbers followed by the Consumer Confidence reading at 10 AM.

Housing demand has been extremely strong this year bu the Case-Shiller number is expected to soften from 6% to 5.8%.  Consumer Confidence is also expected to retreat ever so slightly today but continues to remain very strong and near 20-year highs.  There are only 33 companies on the Earnings Calendar today, and there are none that would likely move the market.

Action Plan

Although it is likely to just a little more price action today, then we saw last Friday I am expecting much.  There were not any major new events over the holiday, and the evil doers of the world behaved.  Futures are pointing to a slightly soft open, but that should not be a surprise after last week’s breakout.  My plan is of course to manage my current positions, but I will need to see some good price action before concerning myself with new trades.  Ultimately I want to see the overall market test and hold the breakout of last week before getting too excited about adding new risk.  Historically June is a month that is flat to just slightly positive.  However, there is nothing about this year that has been normal, so we need to prepare for that fact that anything is possible.

Trade Wisely,

Doug