Bullish but slightly apprehensive.
Bullish but slightly apprehensive seems to be a good description of the overall market condition this morning. As the war of words continues to intensify between the US and North Korea, it’s like a nagging headache the market would like to ignore. However, we should prepare for sudden spikes of volatility and the possibility of violent price action if another missile launch occurs. There are a lot of great looking charts and bullish patterns, but I will only consider defensible low-risk positions right now. I also want to guard myself against becoming overly long with such looming uncertainty.
On the Calendar
The last week of September begins with a light day on the Economic Calendar. At 8:30 AM Eastern we have the Chicago Fed National Activity Index and then at 10:30 AM the Dallas Fed Mfg. Survey. Both are reports of lesser importance and are unlikely to move the market. We have three Fed Speakers today, one before the market open, one at mid-day and one what speaks after the close. A few bond auctions round out the economic calendar day.
The Earnings Calendar shows about 25 companies expected to report quarterly results today. Looking through the list, I don’t see any market movers, but RHT is one that I have seen mentioned in the several times in the trading room. If you’re holding RHT make sure you have a plan when it reports after the close today. We are only about three weeks away from the beginning of 4th quarter earnings. It would be wise to begin considering when companies report as you place new trades.
Action Plan
The uncertainty surrounding the weekend and North Korea only had a modest effect on the market last Friday. If fact IWM finally managed a breakout and a new closing record high. The DIA left behind and indecisive candle while the SPY managed to rally off of the morning lows. The QQQ at one point in the day slipped below the 50-day moving average, but the Bulls went to work bouncing off the average. Fear of a market sell-off seems out of the question with ViX very close to record lows or is this extreme complacency? You decide.
We took some nice profits on Friday to reduce risk to the market so as long as the market remains in it’s up-trend, I will be looking for new portfolio additions. The Dow futures are pointing to a slightly lower open today, so there is no need to rush. One chart of particular interest is AABA closing Friday with a great morning star pattern right off of support and trend. Keep an eye on it for any follow through higher as a potential entry.
Trade Wisely,
Doug
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