Bearish engulfing price action at resistance.  Bears gain the advantage.

The bearish engulfing candles left behind yesterday on the DIA and SPY put the Bears in temporary control of market direction.  The fact that they took control right a price resistance is also very important as well as concerning.  Clearly daily supports are still in place, but we should expect at a minimum a strong challenge.  There is no need to panic but caution flags and warning lights are flashing.  This bearish attack could be short lived but it could also be the first warning sign that this bull run has come to and end.  The Bulls will certainly fight back but we should never ignore the seriousness of a potential failure at resistance.  Plan accordingly.

On the Calendar

The Economic Calendar starts to heat up today with some important reports through weeks end.  Import and Export Prices kick things off at 8:30 AM Eastern time followed by the Petroleum Status Report at 10:30 AM.  This afternoon at 2 PM the Treasury Budget will be released.  Of these reports, the most likely to move the market is the Oil Status Report.  Also noteworthy are the two mid-day Fed speakers.  The Earnings Calendar has over 350 companies reporting today.

Action Plan

The last couple days I have been warning about the dangers of getting overly long a market that’s struggling to break resistance.  Yesterday afternoon the Bears began to overwhelm the Bulls breaking intraday support levels.  This morning the Bears continue their offensive with futures number suggesting the Dow will gap down about 50 points.

Watch your positions closely this morning and be prepared to take profit or exit trades to stop losses if necessary.  The SPY and the QQQ seem to be less affected, but if the DIA continues to push lower, it certainly has the power to pull the other indexes down.  So at least for this morning, the plan will be account management, possible profit taking, and capital preservation.  Keep in mind that daily supports are still in place, so there is no reason to panic, but we also don’t want to bury our heads in the sand.  Always be prepared to act.

Trade wisely,

Doug

The market is pounding on the price resistance door.  Will it open?

With the DIA and SPY pounding on the price resistance door we are left with a question.  Do the Bull have the energy to push it open?  The QQQ has certainly been doing its part resuming market leadership capturing new highs.  Still, the broad market seems lethargic and uninspired.  Futures are currently pointing to a higher open though not enough just yet to overwhelm the Bears.  Perhaps as the morning rolls along, the huge number of earnings reports will provide the spark necessary to break through.

The longer the Bulls pound against the door unable to open it the Bears will become emboldened.  Keep an eye out for clues of failure if this level of resistance proves too difficult for the Bulls to breach.  As of now, I’m sticking with Team Bulls, but I’m prepared to switch sides quickly if the momentum shifts.

On the Calendar

Another light day on the Economic Calendar has the JOLTS report at 10 AM Eastern and 3 Fed speakers.  To move the market the JOLTS number which tracks monthly job openings would require a huge surprise.  No likely!  Of course, the Fed speakers always have a chance of moving the market if they interject an unexpected comment on rates.  Over 400 companies report earnings today with NVDA being one of the most watched.  NVDA number will not be out until after the bell this afternoon.

Action Plan

After a disappointing start yesterday the Bulls managed to stage a small choppy rally.  The DIA and SPY closed just slightly bullish, the IWM recovered from early lows, but the QQQ stretched out to a new all-time closing high.  Although bullish, both the SPY and the DIA remain under price resistance.  Both need a burst of energy to break through to new highs.  However, this also the area we have to watch for clues of failure if the Bears gain an advantage.

Counting both stock and options positions, I’m currently holding ten open swing trades.  Considering most of the market is still under the influence of resistance It’s about as aggressive as I’m willing to be at the moment.  It might be wise for some to consider taking profits on current positions before entering new trades.

Trade Wisely,

Doug

Friday’s afternoon rally left price action clues of bullishness.

Clues of bullishness were left behind on Friday but let’s not forget resistance may still have something to say.  As much as I would like to see a bullish breakout, I also have to recognize that both the SPY and DIA still have need fight through new high resistance.  It is very importance we put aside the bias of what we want to happen and be willing to see clues of reversal as we test resistance.  Believe me, I want to see the market breakout, but that is a bias that can be very dangerous.  As we test resistance levels, I must remain objective and focused on the price action.  Like it or not, isn’t this exactly where a failure could occur?  Stay sharp, focused and flexible!

On the Calendar

We kick-off the new week with a newly elected French President at the helm.  At least, for now, the market seems to support Macron removing a little uncertainty.  We have 2 Fed speakers before the market opens, but after that, the Economic Calendar has nothing else of note.  On the Earnings Calendar, the market faces another big week of reports.  Today there are more 260 companies reporting so remain vigilant in your preparation for new and existing positions.

Action Plan

I must admit to being a little disappointed seeing the futures point to a lower open this morning.  With the end of the day bullishness on Friday and the French election, not ruffling feathers I was expecting more bullishness.  As normal I looked through a lot of charts this weekend.  Although one can clearly see a tentativeness in the broad market, there are a substantial number of bullish charts with good signals.  If the overall market begins to display a little follow through strength, I will be looking for new positions today.

Anytime we are at or near new highs it’s easy to make the mistake of becoming complacent.  Always keep in mind that a failure at resistance is possible.  It’s very important to remain watchful for clues of reversal when testing new highs.  Head fakes and whipsaw price action are always possible at resistance.  Equally important is avoid predicting and simply follow price action.  Currently, my read of the price action of the overall market as bullish but I know it can pivot in about half a heartbeat.  If we simply follow price rather than thinking, we can predict it; we will naturally be more flexible if a change occurs.

Trade Wisely,

Doug