Bulls Stepped Up

After the nasty gap down open yesterday, the bulls stepped up to defend key support levels producing nice bullish engulfing signals on the DIA, SPY, and QQQ.  I honestly was hoping to see a very strong bullish follow-through this morning, but so far the Futures are pointing to muted open.  With a dangerous hurricane bearing down on the east coast and the continued threat of new tariffs a somewhat muted open is not all that surprising.

Bullish engulfing candles are great signals but remember they require a bullish follow-through to be valid.  If the bulls are unable to follow-through, the bears could see that as a sign of weakness and attack.  So come on bulls we need you to dig in and push hard!  It’s very easy to see great bullish signals and become overly biased and over committed to long positions before price confirms direction.  Stay focused on price action and be careful not to load up too heavily long until we see some follow-through.

On the Calendar

We kick off the Wednesday Economic Calendar at 7:00 AM Eastern with the MBA Mortage Applications.  At 8:30 the PPI according to consensus is looking for a 0.2 percent increase in August, and when excluding food, energy and trade services a 0.2 percent gains is also expected.  The Atlanta Fed Business Inflation Expectations is at 10:00 AM.  Then the EIA Petroleum Status Report comes out at 10:30 AM and although a market-moving report it’s not forecast forward with a consensus estimate.  We have a Fed Speaker at 12.45 PM and a Bond Auction at 1:00 PM.  Last but not least is the Beige Book release which is used by the FOMC to set monetary policy.  The next FOMC meeting announce is in 2-weeks on 9/26.

On the Earnings Calendar today we have just nine companies reporting.  There are no particularly notable reports before the bell, but after the close TLRD, PVTL & OXM are the most noteworthy.

Action Plan

Another day another nasty whipsaw but this one finished the day on a very positive note.  The DIA and SPY supports were not only defended, but Bulls rallied with enough energy to leave behind bullish engulfing candles.  The QQQ also produced a bullish engulfing candle rallying back to an important resistance level while the IWM held support but largely rested.  Asian market closed down across the board last night, and the current European markets are mixed but mostly positive.

Bullish engulfing candles are great but still require bullish follow-through price action to confirm the signal.  As I write this, the US Futures are suggesting only a modestly higher open this morning.  I must admit I was hoping for a bit more bullishness this morning following such a nice reaction to support levels yesterday.  However, with a powerful hurricane bearing down on the east coast and the lingering threats of new tariffs it’s not all that surprising to see a slightly muted response.  The good news, at least for now, is that it’s bullish but be careful not to chase and stay focused on price action.

Trade Wisely,

Doug