Bullish Open

The Futures are pointing to a bullish open this morning with world markets follow US Friday rally.  Political trade war rhetoric was kept to a minimum over the weekend allowing the markets to focus and follow-through on the very strong employment situation report.  With the odd holiday week behind us, volumes should improve as the markets look forward to 3^rd quarter earnings season kicking off this coming Friday with several big banks reporting.

This morning the Dow is gaping up right into its 50-day average that could serve as resistance so it would be wise to exercise a little caution because we are not out of the woods just yet.  There is no need to rush or predict, wait for proof that buyers are stepping in supporting this morning gap.  There is still technical damage to repair, but the positive price action in the QQQ, SPY, and IWM are encouraging that the bulls are finding their footing.

On the Calendar

A light day on the Economic Calendar to kick off this week of trading with no expected market-moving reports.  We have a Fed Speaker at 9:10 AM, three bond events between 11:00 AM & 11:30 AM, TD Ameritrade IMX at 12:30 PM with Consumer Credit at 3:00 PM closing the calendar day.

We have just nine companies reporting earnings today with the most notable being HELE coming out before the bell today.

Action Plan

We got through the weekend without increasing trade war concerns.  Asian & European markets were bullish overnight following our Friday rally based on good jobs numbers and a huge improvement in the international trade deficit.  As I write this mornings blog, the Dow Futures are pointing to a  gap up open of more than 100 points at the open.  With nothing on the Economic or Earnings calendar likely to change that a follow-through of Friday’s bullishness is likely as long as politics stay out of the news.

The Dow, however, presents a bit of a conundrum this morning gaping up yet still under its 50-day moving average.  The exact place where a failure could occur.  The SPY, QQQ, and IWM are in a far stronger pattern having held their 50-day averages and finding buyers to rally them off these key supports.  Keep in mind the SPY, QQQ and IWM all have price resistance levels above to watch closely.  With the Holiday week now behind us and 3^rd quarter earnings beginning at the end of the week, volume should show improvement and hopefully so will daily whipsaw in prices.  Although I’m hoping price action will now begin to improve, we must still exercise caution when we see pre-market gaps into resistance levels.  Whipsaws and full reversals are possible.  After the morning rush watch for clues that buyers are stepping in supporting the gap.  Remember the old saying, fool me once shame on you, fool me twice shame on me.

Trade wisely,

Doug