The futures price action suggests the Bulls are back in town!

The pre-market futures price action seems to indicate that the Bulls got everything they wanted over the weekend.  The establishment candidates win in Europe removing much of the uncertainty of their path forward.  Also, our President has put a very ambitious plan for Congress this week.  Not only is he expecting the passage of the New Health Care plan but also his new Tax Plan as well as a budget extension.

The Bulls seem to like everything they hear and apparently want to party like it’s it 1999.  As I write this, the Dow Futures are pointing to a nearly 200-point gap up.  It would be easy to let our emotions run wild this morning but let’s not forget that Congress must get something done!  Passing just one of these important measures would be a big week for this Congress let alone three!  If they fail should we expect a similar Bearish response in the market?

As much as I love seeing resistance levels broken, I have to remember that a one day gap up move does not make a trend.  A pullback to test support is not only possible but likely.  It would not be out of the question to see a big intraday whipsaw to test support with emotions running this high.  Keep a very close eye on price action this morning for quick reversals.  The wise trader will maintain discipline and stick to their rules of engagement no matter how emotional the market may be.

On the Calendar

The Economic Calander starts with week with a whimper but will end with a roar.  Today we have no major reports just a couple Fed speakers pontificating on interest rates.  However, as we move the week progresses we have several market-moving stories with the GDP number front and center Friday morning.  The Earnings Calendar kicks into high gear this week with nearly 1200 companies reporting by Friday.  Today more than 100 report earnings, so it’s a good idea to check and recheck before entering new trades.

Action Plan

At 8:00 AM Central Time I am being interviewed on a local radio station.  I should be finished up by the time the market opens today, but I will likely miss the first 30 minutes of the day.  I’m not holding many positions and stops are in place, so nothing to worry about there.  Just as soon as I get back, I will dive into the charts to see what I can find.

Keep in mind; we could experience a lot of volatility this morning.  Sitting on your hands for the first 30 minutes to allow the wild price fluctuations subside would likely be a wise move today.  Eventually, the Market could wake up to the fact that Congress saying they will do something is a long way from them getting it done!  If they fail, I think we could see Bears regain control.  Buckle up it could be a rough week!

Trade Wisely,

Doug

Yesterday’s price action was great but can it follow through?

Thursday’s price action was just enough to inspire a hopeful vision of bullishness.  As nice as it was to get some relief from the selloff yesterday, more is needed to prove that its over.  One of the first lessons to be learned in trading is that one day of bullish price action does not make a trend.  Follow through is required.

A single day of price action can suggest reversal; it can inspire bullishness but it truth without following though it’s only hopeful speculation.  Let’s keep in mind that the DIA and the SPY rallied to test resistance but failed to break it.  On the other hand, the Q’s and the IWM found the energy to break resistance.  Now the question is, can it hold?

Personally, I hope that it can, but I’m unwilling to speculate and risk my capital until I see a bit more proof.  I have a rule that resistance does not become support until its tested.  Over the year that rule has saved me from taking significant losses Hoping that support will hold.  Hoping that something is true is natural but risking capital on Hope is nothing more than gambling.  Las Vegas has build monuments with the lost capital of hopefulness.  I understand that waiting is hard, but it’s my opinion that waiting is much easier than the pain of loss.

On the Calendar

We kick off the Economic Calendar today with a Fed speaker at 9:30 AM Eastern time.  The PMI Composite number quickly follow at 9:45 AM with Existing Home Sales at 10:00.  Both reports have the potential to move the market.  It would be wise to keep an eye on price action after these reports with the market as such a critical point.  On the Earnings Calendar, we have 36 companies reporting today but keep in mind there are 110 reporting Monday.  Plan accordingly and be prepared.  Not checking is lazy and we all know there is no room for lazy when our money is at stake!

Action Plan

As you know, I consider Friday as Pay Day!  As a result, my focus shifts from buying to new positions to taking profits.  With all the uncertainty we are currently experiencing in the world right now I feel much more comfortable reducing risk before the weekend.  One of the hardest lessons I have ever learned is never to allow greed to get in the way of taking a profit.  We all want to hold our for higher gains, but experience has taught me that very often less is more.  Commissions are cheap.  I can always buy a position back on Monday, but I can not guarantee there will be a profit unless I put it in the bank!

Trade Wisely,

Doug

Uncertainty fuels the price action to another day of losses.

The short-term price action rally was only able to hold out for a brief time yesterday.  The Bulls had a short-lived spurt of energy but once GS started to turn back down everything followed.  Okay, enough of the past, where do we go from here?  I would like to think we are due for an oversold rally.  However, as of now, there is nothing in the charts to suggest that.

Earnings reports have the potential to dig us out of this hole, but if another bell weather like GS or IBM disappoints the Bulls may give up the battle.   After the bell yesterday we had a good round of reports, and so far this morning the results have lifted the futures.  The big question is will it be enough energy to break resistance?  I think we will need to see a media darling company like Amazon or Facebook blowing the doors off of expectations to make that happen.

On the Calendar

Right out of the gate this morning we have a Fed speaker on the Economic Calendar at 8 AM Eastern.  Two potential market-moving reports, Jobless Claims and the Philly Fed Survey at 8:30 AM.  The jobless number would most likely have to be a big surprise to move the market.  As a result, the Philly Fed number is the one to watch this morning.

Plan of Action

My plan for the day is simple.  Maintain my current positions and carefully watch for clues of a bounce.  Why a bounce?  The overall market has been in decline for more than a month.  I, of course, could easily be wrong but I think a relief rally could begin at any time.  Keep in mind there is not a thing in the charts currently suggesting that!  Also, know I will wait for evidence of a rally before adding long risk to my account.  My rules require that I only take short positions at or near resistance, not at new lows.  Waiting is hard but its better than buying up puts or trying to short at market lows.

Trade wisely,

Doug

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