Bull and Bear Battle

Today could be a very interesting Bull and Bear battle.  At this time the Bulls continue to hold the high ground with the DIA, SPY, and QQQ holding onto current trends.  However, with the US Futures currently pointing to a gap down open this morning, the bears have a chance to produce a bearish Island Reversal pattern.

As of late morning, rallies have met with afternoon profit-taking raising the questions about the strength of the bulls as we test market highs.  Perhaps the Bulls are simply playing possum to get enough trades short to pull off a short squeeze rally.  Unfortunately, with the overall breadth down-trending we should prepare for the possibility of a market pullback.  Let me be clear; there is no reason for panic, but there is reason for caution and preparedness.  Stay focused on price action for early clues to direction.

On the Calendar

We have a light day on the Economic Calendar this Tuesday.  Early this morning the Motor Vehicle Sales report expect an improvement for total unit sales in September with a reading of 16.9 million annualized rate vs. 16.6 million in August.  The Redbook comes out @ 8:55 AM Eastern, a Fed Speaker @ 10:00 AM, a Bond Auction @ 11:30 AM, the Fed Chairmen himself closes out the calendar day speaking at 12:00 PM.

On the Earnings Calendar, we have 12 companies reporting today with PAYX and PEP as the most notable and both before the bell.  PEP reported well very early this morning.

Action Plan

As we would expect, the market was relieved, and reacted very bullishly, to the completion of the North American Trade agreement.  Unfortunately, the big rally struggled with the price resistance near all-time highs as profit-taking began to take hold.  The QQQ printed a new record high by a single point before sellers started to take over.  Asian markets closed mixed but mostly higher, but European Markets are currently seeing red across the board.

US Futures are currently under pressure this morning currently suggesting a gap down open.  As of this moment, the market looks to open below yesterdays open in the DIA, SPY, and QQQ which has the potential to produce a bearish island reversal pattern.  Overall up-trends continue to favor the bulls except for the IWM that yesterday produced a nasty bearish engulfing candle the broke below the long-term uptrend.  The bears could easily gain the upper hand unless the bulls mount a solid defense.  I suggest approaching the market this morning with a little caution this morning until we get a clearer picture.  As always stay focused on price action for clues.

Trade Wisely,

Doug