Bulls are large and in charge.

I guess there is nothing quite like 2 of the most damaging storms in history to inspire the Bulls to run.  The theory is these storms will open the flood doors of Federal Spending for the cleanup and rebuilding.  All the rebuilding will also create big boosts in material and durable goods to rebuild the lives of those affected.  If there is one thing, the market loves its massive government spending no matter future consequences.  The Bulls are once again pushing for higher prints this morning with the futures pointing to a gap up of nearly 50 points in the Dow.  Clearly, the Bulls are large and in charge, but I would caution you about chasing.  If you missed this move then just let it happen.  Eventually, the market will rest or pull back providing lower risk entries rather than chasing an already overextended move.

On the Calendar

Another light day on the Economic Calendar with a single report of significance and several bond auctions.  At 10:00 AM we get the JOLTS report which tracks job openings.  Job openings have remained strong @ 6.163 million. However, hires have lagged behind at 5.356 million pointing to a tight labor market.  The consensus is expecting a slight pullback in offerings to 6.010 million in today’s report.

The Earnings Calendar has 27 companies expected to report today.  Overshadoweding earnings today is the unveiling of the highly anticipated Apple iPhone 8 at 10:00 AM Pacific Time.   Analysts expect this phone will finally contain major innovations.  Apple product release events in the past have moved the market so if this is a game changing device it could have a positive effect on price action.  On the other hand, if the company disappoints the opposite is also possible.

Action Plan

What’s the right move after the Dow rallies nearly 300 points in a single day followed by a gap higher the following day?  I won’t assume that I know what’s right for you, but I know for me it means to focus on profit taking rather than adding new risk.  Wild bullishness like this creates a lot of emotions.   The feeling of missing out causes a lot of traders to chase in just before the pullback.  Let’s be very clear here if you were not holding long positions last Friday then you have already missed it this move.  Jumping in today would be a very bad idea.  Wait for the market to rest or pullback and then enter at or near support rather than chasing and buying at price resistance.

Please understand I am not saying that the market can’t continue going higher before it pulls back.  It definitely can, but that is not a good reason to blindly follow like sheep.  A rest or a pullback will occur, and it will provide a better risk/reward trade.   Plan your trades careful and have defensible positions that fit your risk tolerance.

Trade Wisely,

Doug