Looking for inspiration.

Yesterday’s insipid price action seems to have finally given way to a little bullish inspiration this morning.  Futures are pointing to a substantial gap up but will need some follow-through buying if we are to recover the 50-day averages on the DIA, SPY and the QQQ.  Let’s hope earnings continue to inspire market confidence because we are at a critical decision point.

A failure to recover and hold the 50-day average could easily inspire a bear attack and confirm another lower high in the market.  However, if earnings continue to show pricing strength and the bulls get back over this important support, it could provide the bullish inspiration for another leg higher.  As of this moment, the bulls seem to have the upper hand, but with so many reports over the next few days, anything is possible.  Stay focused and buckle up it could be a wild and bumpy ride.

On the Calendar

The Tuesday Economic Calendar has three potential market-moving moving reports.  At 9:00 AM the Case-Shiller is expected to stay very strong even though consensus says it will pull back to 6.2% vs. 6.4% year-on-year.  The biggest number today is the New Home Sales report at 10:00 AM which forecasters see an improvement to 630,000 for March vs. the February reading of 610,000.   Also at 10:00 AM is the Consumer Confidence staying very strong but slipping slightly to 126.1 in April vs. 127.7 March print.  The Richmond Fed Mfg. Index and the State Street Investor Confidence also come out at 10:00 AM but are not expected to move the market.  We have 3-bond auctions this afternoon to complete the calendar day.

The Earnings Calendar currently shows 174 companies will report today.  Make sure you’re checking reporting dates on all stock you currently own and have a plan to deal with possible big price moves that can occur.

Action Plan

Yesterday saw a bit more choppy price action selling led by the tech sector as AAPL continues to suffer from bear attacks.  The DIA, SPY and QQQ’s are all below their 50-day averages with IWM still holding solidly above.  Currently, the Dow Futures are pointing to a solid gap up open of more than 100 points responding to positive earnings reports.  With so many big reports coming out over the course of this week expect and extra short of volatility, big gaps, and very fast price action.  As of now the bulls seem inspired by the earnings results but keep in mind with hundreds more over the next several days that their mood can quickly shift.  Stay on your toes, remain flexible and focus on price action.

Trade Wisely,

Doug