Uncertainty continues to plague the market.

The choppy price action and violent reversals continue to plague the market.  Emotional uncertainty seems to be the best way to describe current price action.  As a result, many charts are displaying technical damage, raising the concern of a market top.  Geopolitical events are also raising uncertainty levels adding additional risk to every trade.  This morning the futures are pointing to a gap down which will break some important support levels.  Those that were determined to trade yesterday will most likely see an unhappy result in their account this morning.  Not every day is a good day to trade!  Sometimes the best decision is just to stand aside and watch.

On The Calendar

We have a busy morning on the Economic Calendar today.  We get it going with the ADP Employment Report at 8:15 AM Eastern and quickly followed by International Trade and Jobless Claims at 8:30.  The ADP number missed the mark last month over shooting by 106K!  For June their guess for 180K jobs created.  The International Trade gap is expected to narrow slightly to 46.2 billion from the 47.6 reading last month.  Labor demand is expected to remain very strong with and expectation of 244K jobless claims which is unchanged from last week.

At 10:00 we get the latest reading on the ISM Non-Mfg Index which forecasters see coming in at 56.5 versus May’s 56.9 print.  All eyes will be on the 11:00 EIA Petroleum Status Report which has been trending slightly lower.  However, supplies have remained so strong oil prices have continued to struggle, and that is not expected to change much today.  We have 1 Fed Speaker during market hours at 10:00 AM and then after the close today at 7:30 PM

We have 13 companies expected to report on the Earnings Calendar today.  I would not expect any of the companies reporting to market-moving or particularly noteworthy.

Action Plan

Yesterday turned out about as expected yesterday with light volume and choppy price action.  Technically speaking nothing changed in the charts.  During the live session yesterday I gave my case caution looking over the four major indexes.  Unfortuniantully, it would seem my concern is showing up in this morning’s futures currently suggesting a gap down at the open.  Saber rattling with the North Korean dictator has intensified raising the level of uncertainty for the market.  Also, keep in mind that the big Employment Situation report is tomorrow morning.  Often the market is very choppy before this report so doesn’t be surprised to see another day of poor price action.

My overall plan remains the same.  Manage current positions and continue refining my shopping list of potential trades.  If I do trade, I will plan smaller than normal positions due to the price action risk of the market.  Always remember Cash is a Positon.

Trade Wisely,

Doug

Messy Contradictory Price Action Signals.

We are the middle of a big of a technical mess when it comes to the index charts.  The DIA’s trying to make new highs at the same time the QQQ’s are trying to make new lows.  As the SPY remains stuck below resistance, the IWM is showing strength.  It is my opinion that contradictory price action signals such as this make the market a very very dangerous place for swing traders.  The whippy price action and quick reversals are more suited for swift day traders.  If you decide to trade, then prepare for anything.  I suggest smaller than normal positions because stop outs will be commonplace and Emotions will likely run high.

On the Calendar

Today we start off with the Factory Orders on the Economic Calendar at 10:00 AM Eastern.  Orders are expecting to see their second decline in a row with durables just down slightly, and nondurables such as energy remain weak.  We must wait until 2:00 PM for the next report which is the FOMC minutes.  It’s unlikely we will learn anything new from the minutes, but the market is typically choppy and tentative ahead of the number.

On the Earnings Calendar, there are 19 companies expecting to report earnings.  One, in particular, YUMC, has had a lot of member interest lately so make sure you have a plan if you’re holding it as it reports after the close.

Action Plan

Monday the DIA tried to lead a full-on breakout reversing last Thursday’s selloff.  Those that chased in were likely disappointed to see it whip back down before the close wiping out more than half of the day’s gains.  The SPY also attempted an early rally but left behind a black candle below price resistance.  The QQQ once again gave up support testing the lows of last Thursday and closing almost at the low of the day.  IWM, on the other hand, managed to hold above support putting in a bullish morning star pattern.

Talk about a mixed bag of signals and technical mess to try and decipher in the charts.  All of the whippy price action and contradictory directional signals is a head game I’m pretty sure I don’t want to play.  Coming back after a mid-week holiday I think we could see lighter than normal volumes as may trader will likely extend vacations through to next week.  Toss in the FOMC, and you have the formula for a perfect mess that could prove to be very dangerous.  I think I will continue to stand aside as far as new positions until some of this mess gets cleaned up and a direction established.  I will be looking for new trades, building shopping lists and refining them but it will take a nearly perfect setup for me willing dive into this emotional quagmire.

Trade Wisely,

Doug

Beware Price Gaps Below Resistance.

It is always wise to beware price gaps.  When they occur below resistance levels after a significant selloff, I want to focus on the price action and avoid the emotion a gap can create.  The fact that the market closes early today and will likely lack volume makes we want to avoid it all together.  Do as you like, but as for me, I will be standing aside.  NYSE closes at 1 PM today, and Tuesday the market is closed so plan accordingly.

On the Calendar

The Economic Calendar begins the first trading day in July with the PMI Manufacturing numbers at 9:45 AM Eastern.  Last month PMI slowed to 52.1, and consensus suggests it will remain steady for June.  At 10:00 AM we get the most important report of the day, the ISM Manufacturing Index.  Earlier this year ISM peaked at 57, but forecasters are calling for a 55.1 print in June which is a slight improvement over May.  Construction Spending is also at 10:00 AM today which is expected to show improvement with a 0.5% gain.

There are nine companies expected to report earnings today.  I don’t expect any of them to be market-moving reports.  Keep in mind that today marks the first trading day of the 3^rd quarter.  That means we will soon be right back into earnings season.  Make it a habit of checking for earnings reports on every position you are in and every new trade you are considering.  Failing to do so can be a costly mistake.

Action Plan

Friday saw nice relief rally, but by the end of the trading day much it was given back with a quick move lower.  As expected, most of the day saw very choppy price action.  Futures are currently pointing sharply higher suggesting a gap of nearly 70 points at the moment.  Let’s keep in mind that today is only a partial day of trading.  The big gap open will most likely meet with light volume trading after the morning rush.  It would also be wise to notice that all the major indexes will still be below resistance levels.

As for me, I plan to do no trading at all.  If I were planning to add risk today, there is not a chance that I would chase the gap up open.  I would give it at least 30 minutes trading and make sure that real buyers step in to support the gap.  Remember gap up opens into resistance levels are subject to whipsaw price action.  Chase in and you could find yourself buying at the highest price of the day entire day.

Trade Wisely,

Doug

High Volatility and Challenging Summer Trading Likely Lies Ahead

Yesterday likely marked the beginning of challenging summer trading with high volatility tossed in for goo measure.  As a general, rule summer markets are difficult to trade with lots of choppy price action.  As it turns out, summer seems to have come late this year dispelling the old saying, sell in May and stay away.   The other challenge we could face is that the market may be a significant market high.  A correction that many would say is way overdue.  Let’s avoid all the predicting and just focus on price action because the clues will be there if we are unbiased.  Also, remember that a market pullback is not a personal attack on you so don’t fight it.  Think of a correction as a Mega Sale at your favorite store where we could get the chance of getting much better deals on quality products.

On the Calendar

The last trading day in June the Economic Calendar only has three items of concern.  We start off at 8:30 AM Eastern with the biggest number of the day, Personal Income, and Outlays.   The consumer is expected to slow down in May as is the personal income however consensus suggests that food and energy will rise.  Thus, the overall number is expected to come in unchanged at 1.5%.  At 9:45 we get a reading on the Chicago PMI which has been steadily increasing the last four months to 59.4 but the forecast for today indicates a pullback to 58.2.  Last but not least we get a reading on Consumer Sentiment at 10:00 AM which fell back 2.6 points in May to 94.5.   Consensus suggests it will hold stable at that number for June.

The Earnings Calendar is giving us a break today with only two companies reporting, EROS and OSN.  A big winner after the bell yesterday was NKE.  It will be nice if this old friend of mine gets back in a trend because it has proved to be an excellent money maker in the past.

Action Plan

Yesterday was an ugly day for the market breaking support levels and creating significant technical damage to the index charts.  The end of day rally was a sweet relief and with the futures pointing to a gap up open some of the bearish pressure will be released.  Just remember V-bottoms are rare and we should expect yesterday’s lows to see a retest in the near future.   We will now have to tune into possible failure patterns at or near resistance.

Today my plan is to take the day off!  We can expect after the morning rush to see volumes drop off quickly as may traders will be starting the 4^th of July Holiday early.  I will also not be trading on Monday.  Tuesday the market is closed, but I will be back in the saddle Wednesday morning rested and ready for the challenges of summer trading.

Trade Wisely,

Doug