Be careful not to chase.

Another day and yet another triple point gap indicated by to the Dow Futures.  Be careful not to chase!  One of the many issues I struggled with as an inexperienced trader was getting caught up in the drama of the market.  I would watch all the financial news with the exaggerated headline graphics and talking heads touting their market greatness and lose all sense of discipline.  Que the dramatic bumper music.  I would see the futures pointing to a big gap up and jump headlong into the shark-infested waters.

After getting my fair share of shark bites and losing more capital than I care to remember if finally learned a few very painful lessons.  Trading plan and trading rules are there to protect you from you.  However, they only work if you learn to ignore the drama and develop the discipline to follow them.  After 13 years of supporting my family as a full-time trader, I can confidently say it’s my discipline to follow my plan that has made me successful.  Are you following your plan or are you allowing the drama of the market control your destiny?

On The Calendar

The last week of February begins with a busy week on the Economic Calendar.  The very important New Home Sales number come out at 10:00 AM Eastern as is expected to weaken but matain its strong rising trend with at print of 600K.  At 8:30 AM is the Chicago Fed National Activity Index and at 10:30 comes the Dallas Fed Mfg. Survey, but neither is expected to move the market.  We round out the today’s calendar with three bond related events.

We also have another busy week on the earnings calendar as this earnings season continues to drag forever.  Today there are over 12o companies expected to report earnings today.  Always be prepared.

Action Plan

On Friday afternoon last week, the price action started to indicate improvement and give the appearance of holding support.  The Dow managed to close above the psychological 25k level as well as hold above the 50-day average.  The SPY also showed bullish strength above the 50-day average, and even the beleaguered IWM managed to close a few ticks above this important average.  The QQQ continued to matain market leadership and closed Friday within striking distance of all-time resistance highs.

Unfortunately, it looks as if this gap-happy market will continue this morning as with the Dow Futures suggestion it will open about 150 points above Friday’s close.  With VIX pulling back to test price support and the 50-day average be careful not to get caught of in morning drama and chasing into the gap.  Keep in mind that price volatility remains high and the big intraday reversals we experienced last week are still possible.  Stick to your plan and stay disciplined to your rules.

Trade Wisely,

Doug