The Bulls maintain control.

There is no question that Bulls maintain control when looking at the daily index charts.  The DIA in particular looks like smooth sailing with nothing blue skies ahead.  Although calm on the surface, we all know there has been a lot of turbulence.  Big price swings intra-day has made it a very challenging market for swing traders.  With VIX retesting historical lows the only the DIA reaching out for new highs with a gap up open I want to stay calm and avoid chasing at the open.  I am not suggesting a whipsaw will occur but I want to point out the potential exists.  I will need to some follow-through buying after the gap this morning before making any new decisions on risk.

On the Calendar

A very light day on the Economic Calendar today.  Other than a few bond auctions we hear for a Fed speaker at  8:00 AM eastern and then another after the market close at a 7:00 PM.  There are only five companies reporting earnings today none of which are likely to move the overall market.

Action Plan

Last week’s volatility keeps the caution flags flying high.  Three times last week the market made sharp moves lower giving everyone the reason for concern.  However, with the DIA leading the way with whippy intraday price action it always managed to recover.  The pre-market futures are very positive this morning pointing to new record prints for the DIA.  The SPY, IWM and QQQ’s however still have price pattern that less than impressive and should give us reason look carefully before leaping.

As you know, I am always very watchful of potential whipsaws price action at or near market highs.  With the DIA breaking out and all the other indexes lagging behind it would seem to be the perfect setup for that possibility again.  So keep and close eye and avoid chasing at the open.

It is also very important to avoid bias and just follow the market.  The DIA is displaying bullishness, and there is currently nothing suggesting it is ready to reverse or even slow it’s progression higher.  On the other hand SPY, IWM due suggest weakness is possible.  The QQQ’s has suffered some major technical damage that as has a lot of work to do before it cold be considered bullish.  I will be looking for new long trades today, but I will not chase right after the open.  I will need to see that real buyers are stepping and that the gap up is not just another institutionally created pump and dump.

Trade Wisely,

Doug