Bulls and Bears in a dead heat at resistance.

At the open yesterday, it appeared that the Bears were taking control, but Bulls fought back with equal vigor.  As a result, the day ended with the Bull and Bears locked in a virtual dead heat.  All the major indexes, however, remained under resistance and short-term downtrends remain in tact.  A stalemate just below resistance is not the place to be actively adding risk.  Always remember anything is possible and don’t assume you can predict the outcome.  If you do decide to trade, I suggest keeping positions smaller than normal until you see the Bulls gaining the upper hand.  Also, have a plan to protect current profits and cut losses quickly if the Bears gain the upper hand.

On the Calendar

We kick off the Thursday Economic Calendar with the Weekly Jobless Claims number at 8:30 AM Eastern.  Normally we would have seen an increase in Jobless numbers this time of year due to the annual auto retooling.  However, this year claims have held steady at historic low levels.  Forecasters are expecting to see an increase this week to 237K vs. 232K on the last reading.  At 10:00 AM we get a reading from Existing Home Sales which are expected to rise to 5.565 million annualized rate vs. the 5.520 in the last report.  After that, we have a few reports that are very unlikely to influence the market and a bunch of bill/note announcements.

On the Earnings Calendar, we have nearly 80 companies expected to report today.  Retailers play a prominent role today with reports from ANF, BURL, DLTR, FLWS, and SHLD all reporting before the bell.  It’s been a rough quarter for retail so let’s hope we can begin to see that trend change today.

Action Plan

After the morning gap down the Bull attempted a rally but near resistance levels, they seemed equally matched by the Bears.  Sideways choppy price action most of the day was the result.  Resistance levels continue to hold as does the newly developed technical downtrend.  Currently, futures are pointing to a slightly higher open, but as of now, it appears to be less than yesterdays highs.  Perhaps today’s economic and earnings data will provide some directional inspiration after the open.

Currently, I am holding some nice gains in several positions and yesterday during the daily live session I picked up a few DIA and SPY puts.  Please understand I am not trying to predict the market is about to fall with the put purchase.  I am merely adding a little hedge to lower my long exposure to the market.  As we approach the weekend, I will have a focus on taking some profits.  With the overall market testing resistance, I will also be very focused on price action.  I want to be prepared to act if the Bulls break through resistance or if the Bears gain the edge on this battle ground.

Trade Wisely,

Doug