Productive price action as the market rests.

Thus far the pullback/rest is showing productive price action in my opinion.  Healthy markets commonly rest or pullback to test price supports.  As of now, this resting pullback is not showing signs that the bears are taking over so far.  Of course, that can always occur very quickly around new market highs.  As the overall trend is still up will remain bullish, but I also want to be prepared in the event the Bears decide its time to feed.   Always keep in mind that whipsaw price and swift reversal are common around potential market tops.  Although fear is essentially not present at the moment we all know how quickly that can change so be prepared.

On the Calendar

The only thing of significance on the Economic Calander this hump day is the EIA Petroleum Status Report at 10:30 AM Eastern.  The last three reports have shown a decline in supplies, but the news lately from US producers suggest they have no intentions of slowing down.  As a result oil prices and oil companies have continued to show weakness.  Today’s number could easily move if this market.

On the Earnings Calendar, there are 29 companies expected to report earnings this morning.  A quick scan of those on the docket there is none that would normally move the market.  However, if you own or happen to be considering one of these companies, please understand the implications.

Action Plan

The market having rested a couple of days and pulling back to an area of possible support is healthy price action in my opinion.  Futures have been dancing around the area of a flat open this morning.  I think the Oil status number could be very influential on the market direction today.  A build in supplies would be negative while a reduction in supply is positive for oil prices.

I will, of course, attend to current positions first but will continue looking for new long positions staying with the direction of the overall market.  I will be very watchful for whipsaw price action at these levels and will exercise caution on new trades until I see the Bulls picking up their activity.

Trade Wisely,

Doug

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