The Bulls maintain control.

There is no question that Bulls maintain control when looking at the daily index charts.  The DIA in particular looks like smooth sailing with nothing blue skies ahead.  Although calm on the surface, we all know there has been a lot of turbulence.  Big price swings intra-day has made it a very challenging market for swing traders.  With VIX retesting historical lows the only the DIA reaching out for new highs with a gap up open I want to stay calm and avoid chasing at the open.  I am not suggesting a whipsaw will occur but I want to point out the potential exists.  I will need to some follow-through buying after the gap this morning before making any new decisions on risk.

On the Calendar

A very light day on the Economic Calendar today.  Other than a few bond auctions we hear for a Fed speaker at  8:00 AM eastern and then another after the market close at a 7:00 PM.  There are only five companies reporting earnings today none of which are likely to move the overall market.

Action Plan

Last week’s volatility keeps the caution flags flying high.  Three times last week the market made sharp moves lower giving everyone the reason for concern.  However, with the DIA leading the way with whippy intraday price action it always managed to recover.  The pre-market futures are very positive this morning pointing to new record prints for the DIA.  The SPY, IWM and QQQ’s however still have price pattern that less than impressive and should give us reason look carefully before leaping.

As you know, I am always very watchful of potential whipsaws price action at or near market highs.  With the DIA breaking out and all the other indexes lagging behind it would seem to be the perfect setup for that possibility again.  So keep and close eye and avoid chasing at the open.

It is also very important to avoid bias and just follow the market.  The DIA is displaying bullishness, and there is currently nothing suggesting it is ready to reverse or even slow it’s progression higher.  On the other hand SPY, IWM due suggest weakness is possible.  The QQQ’s has suffered some major technical damage that as has a lot of work to do before it cold be considered bullish.  I will be looking for new long trades today, but I will not chase right after the open.  I will need to see that real buyers are stepping and that the gap up is not just another institutionally created pump and dump.

Trade Wisely,

Doug

Whippy price action increases risk.

The whippy price we have been experiencing is pretty typical as a market struggles with new highs.  However, it’s that same whippy price action that chops up traders and increases the risk on every trade they make.  We never know how long a period like this will last.  It’s the wise trader that recognizes the additional risk and curtails their trading activity and decreases the size of trades during higher risk periods.  It’s so easy to lose hard earned profits fighting volatile price action.  Always remember Cash is a position.

On the Calendar

There is no question that this has been a big week on the Economic Calendar.  Today we get a little break with only three noteworthy items.  First, we will get the Housing Starts number at 8:30 AM Eastern.  The April number was a disappointment. However, forecasters see them bouncing back in May to a 1.2 million annualized rate.  At 10:00 AM we the latest reading on Consumer Sentiment which has been trading very strongly this year.   The consensus is suggesting that will continue with a 97.1 print.

After only a brief break we will once again start seeing the Fed speakers back on the news tour.  Today we have one speaker at 12:45.  The Earnings Calendar is also giving us a break today with only one company expected to report.  The company ticker is UTSI, and they have not confirmed the time of the report.

Action Plan

Yesterday we experienced yet another major whipsaw as the market try to decipher what to do at these highs.  For the last ten days, the Spy has chopped in a range of just over 2 points and often visiting both sides of the range each day!  The DIA has seen big point swings every day yet has managed to maintain an uptrend in the process.  Needless to say, it has become a very challenging market for swing traders due to the volatility.  I would like to say it’s over, but there is no reason to believe that today won’t be more of the same so again I’m suggesting caution.

Overall the trend is still bullish thus I will continue looking for long positions, but if I find good trades, I will reduce the trade size until I see extreme whips come to and end.  To successfully trade whippy market stops have to widen to avoid intraday whips from constantly tripping stops.  So, in conclusion, I suggest trading small if you decide to trade at all.

Trade Wisely,

Doug

Volatile Price Action raises questions of a top.

The volatile price action yesterday makes me question if we are truly experiencing a topping pattern under construction.  If so it can be a very dangerous time to trade.  Tops will normally display a lot of false price reversals and nasty intraday whipsaws.  It may be time to reduce trading activity, so we don’t get chopped up in the volatility.  If you have not already considering raising cash in your account it may now be the time.  Always remember that Cash is a position.

On the Calendar

We kick off this Thursday on the Economic Calendar with Jobless Claims at 8:30 AM Eastern.  Claims have been very low, and the forecasters expect them to continue to move lower today.  Also at 8:30 is Philly Fed Business Survey which has been exceptionally well.  Backlog orders have been rising month over month but the expectation for today is for a very slight pullback in the number.   We still have two less important number at 8:30, Empire State MFG as well as the Import and Export prices.

At 9:45 is the Industrial Production number where the consensus is suggesting a 0.2% gain to 76.8% which is very strong.  We have a Housing Market Index report at 10:00 AM and the Treasury International Capital at 4:00 PM, but both are unlikely to move the market unless they come in with a big surprise.

Action Plan

Looking at the futures this morning, I am very happy to have been cautiously sitting on the sideline yesterday.  If you were there with me, then you are also enjoying the relief of know that your capital is safe while the market goes through its gyrations.  The whipsaw after the Fed numbers was a nasty one and I wouldn’t want to rule out the possibility of more today.

I would expect a lot of fast moving price action this morning.  If the Bears really take control, we could see some panic of a top move into the market.  However, if the Bulls continue to fight back as hard as they have been doing lately, then we could easily see a full reversal back up.  Unfortunately, unless you are an experienced day-trader, it would best just to stand aside and protect your money.  I plan to continue being very cautious and don’t expect I will be adding any new risk this morning.

Trade Wisely,

Doug

No fear ahead of today’s huge data dump.

The bulls show no fear at all as we head toward the FOMC announcement and calendar full of big reports.  I would not be at all surprised to see choppy price action today.  Swift whipsaw moves are not at all out of the question as with all the data the market will have to chew through.  With the VIX close to testing historical lows once again it would be wise to remember how quickly no fear can shift to panic.  I plan to do a lot of watching from the sidelines today.

On the Calendar

Today the Economic Calendar is a doozy.  It kicks off with two very big reports at 8:30 AM Eastern, Consumer Price Index and Retail Sales.  Consensus estimates expect the CPI to come in on par with last month’s number of 0.2%.  Retail Sales is also expected to come in relatively flat with only 0.1% growth, as consumer spending remains weak.  At 10:00 we a reading on Business Inventories which is expected to stay very low at 0.1%.  The all important EIA Petroleum Status number comes out at 10:30.

At 2:00 PM we will finally get the FOMC Announcement on interest rates followed by the Fed Chair Press Conference at 2:30.  On the Earnings Calendar, there are 30 companies reporting today so make sure to keep checking.

Action Plan

The market remains tenaciously bullish with the Dow making new all time highs and the SP-500 carving out a new all-time closing high.  The VIX is once again pushing lower and may again test all-time low levels of fear.  Even though the overall market keeps marching higher, it has become increasingly challenging to make money.  The whippy price and surprisingly sharp drawdowns test even the most experienced traders.

With this huge data dump today I plan to move very slowly watching price action closely.  I expect to see very choppy price action this morning, and potentially swift whipsaw moves as the market digests all the data.  Personally, I won’t rule out adding new positions, but I will most likely just enjoy the show from the sidelines.  I have had a fantastic year so far, and I see no need to charge head first into danger.  My method is to be more like a sniper, waiting quietly for the shot picture to clear before pulling the trigger.

Trade Wisely,

Doug

Price action is decisive but support holds.

It was encouraging to see positive price action and the DIA, SPY, and IWM holding price supports.  Even the technically damaged QQQ managed to stave off additional selling.  Price action, however, proved to be very two-sided and whippy.  As a result, the markets left behind indecisive patterns that will keep me on the side of caution.  The market faces a massive data dump tomorrow as well as a rate decision from the FOMC.   Don’t be surprised if we continue to see choppy price action and indecisiveness today.

On the Calendar

Today begins the FOMC meeting that culminates tomorrow afternoon with their decision on interest rates and Yellen’s Press Conference.  Also on the calendar today it’s the Producer Price Index (PPI) at 8:30 AM Eastern and a Fed speaker at 1:45 PM.  PPI rebounded slightly in April, but services remained weak pointing to a concern of demand weakness.  Consensus sees the number increasing by 0.1% with food and energy at 0.2%.

On the Earnings Calendar, we have 32 companies reporting today.  I don’t see any potential market moving earnings reports, but it is always wise to check your holdings and new purchases for reporting dates.

Action Plan

With the FOMC rate decision looming I think could see a lot of chop and whippy price action as we wait.  Odds of a rate increase are running in high 90’s percentile.  As of right now, the overall market seems to be taking the likely rate increase in stride showing fell ill effects.  The four major indexes held up better than I would have expected after Fridays surprise tech sector selloff.

Futures are currently pointing to a slightly bullish open and except for the technical damage in the QQQ overall the market remains bullish.  However, there is a huge wave of data coming at on Wednesday, and I feel the need to remain quite cautious when considering new risk.  I will not rule out adding new positions today but keep them smaller than normal, and I will need to see the Bulls showing better commitment overall.  Choppy anemic price action just won’t get it done.

Trade Wisely,

Doug