The Bulls punish early Bears.

What an amazing recovery of yesterdays gap down is punishing those that attempted to predict the selloff was finally here.  Those that got short in anticipation are now being squeezed out as the Bulls punish early Bears.  A reminder that trying predicting the market is nothing more than gambling.  Traders with big ego’s of their predictive prowess often find themselves fighting the market rather than working with the market.  Believe me; I have the scars from making this mistake more than I care to admit.  The solution is simple but it very hard to learn.

As the market is rallying, try to be a profit taker and sell into strength.  When the market does roll over you will then be less affected.  Then wait for the market to prove it’s ready to go lower before jumping on board.  When your profits are safely tucked away in your account, you can afford to wait.  Always remember you don’t have to trade everyday to be successful.

On the Calendar

The last day of the trading week begins with Existing Home Sales at 8:30 AM Eastern on the Economic Calendar.  Forecasters expect the the number for September coming in a little lower at 5.300 million.  The slide in existing sales is a result of hurricane impacts.  The National Asso. Of Realtors has warned Hurricane effects may slow sales the rest of the year.  We have a Fed Speaker at 2:00 PM and Janet Yellen will Speak today after the market close at 7:30 AM.  Maybe at 2:00 PM is the Treasury Budget report which has already moved several times this week.

On the Earnings Calender, we have just short fo 50 companies reporting.  A lot of eyes will be focused on the Earnings out of GE before the bell today.  The companies stock has been in an ugly decline of around 25% this year.  There is a rumor out there that GE may cut or even suspend it’s dividend today which would likely send the stock much lower.  It will be interesting to see what happens.

Action Plan

After gapping lower yesterday the Bulls went back work and made quite a deminstration of strength.  The DIA set another new record high close by the end of the day.  The other indexed lagged behind but they all rallied signiffiantly off the morning lows.  The Futures this morning are now wildly bullish pointing to gap up of more than 80 points.  Count this as very good lession about trying to perdict the market.  I can guarantee part of the rally yesterday and this morning will be because a lot of folks anticipated a sell off and got short.  They are now getting run over and forced to buy to cover adding fuel to the rally.  A painful lession I had to learn the hard way.

It’s Friday and for that means profit day.  I will be much more focused on taking profits today rather than adding new risk.  Also, keep in mind that this mornings gap up in the Dow could produce whipsaw price action.  Chaiseing, today’s pop, would be very unwise in my opionion.

Treade Wisely,

Doug