Difficult Decisions

Difficult Decisions

With bond yields bouncing and the market suggesting a huge gap up, open traders face difficult decisions this morning.  If the current futures bullishness holds the DIA, SPY, QQQ, and IWM will gap directly into the price and moving average resistance.  Do you trust price action enough to risk your capital and hoping for follow-through buying or even a short squeeze to be triggered?  Do you wait to see if this is a bull trap with the bears ready to defend resistance creating pop and drop pattern?  Or could the morning gap get no follow-through commitment from the bulls or bears and we to consolidate the big gap the rest of the day?

Whatever you decide given the wild volatility we have experienced the last couple of weeks, it will require considerable skills to navigate the price action successfully.  Before leaping ask yourself these questions.  Are you following your rules? What is your plan if your wrong? Do you have and edge or are you just gambling your hard-earned money?  Do your skills match the current market condition?  There are no easy answers in a market full of news-driven uncertainty and emotion.  There are only difficult decisions to make with such high volatility.  What will you decide? 

On the Calendar

On the Earnings Calendar, we have nearly 60 companies reporting on Monday.  Notable earnings include WB, EL, & BIDU.

Action Plan

The relief rally that began last Thursday afternoon is betting a big boost of energy this morning as bond yields bounce and inversion fears subside.  Unfortunately, with the Dow currently pointing to a gap of more than 200 points, retail traders have a tough decision to make.  A big pop like this can certainly trigger a short squeeze, but it can also create a nasty pop and drop if it finds no followthrough buyers.  Indeed a difficult decision with such high price volatility that has proven to punish both bulls and bears with news-driven reversals.

Even with the big gap up this morning the DIA, SPY, QQQ & IWM will still be under the Price resistance of the last high and their respective 50-day moving averages.  If the big morning gap holds throughout the morning, the T2122 will likely signal a short-term overbought condition at the open.  Make no mistake that does not mean immediate bearishness will resume, but it does suggest caution and that we should avoid chasing with the fear of missing out.  Buyers could follow-through to squeezing out short traders, bears could be ready to defend the resistance levels creating a pop and drop pattern, or we might gap with no commitment from bulls or bears consolidating the rest of the day.  Your difficult decision awaits.

Trade Wisely,

Doug

Very few answers.

Very few answers

Lots of questions with very few answers created a very frustrating day of price action on Thursday.  As bond yields finally began to moderate late afternoon, the market picked a direction and provided a least a modest relief rally into the close.  A good round of earnings reports after the bell and a bit of bond market stabilization during the night lifted spirits around the world.  The big question for traders this morning, can we trust this mornings bullishness amidst all the volatility enough to add risk heading into the weekend still full of uncertainty?

Overnight Asian market closed modestly bullish across the board as bond yield slightly improved.  European markets are moving higher this morning after a technical issue delayed the open in the UK.  US Futures are solidly bullish this morning with the Dow pointing to a gap up of more than 200 points.  Be careful not to chase the open in-case this wildly volatile decides to pop and drop.  Also, consider carefully the amount of risk your willing to carry into the weekend.

On the Calendar

We get a little break on the Friday Earnings Calendar with just 68 companies reporting earnings today with DE as the most notable.

Action Plan

Will, there be real progress on trade negotiations or not?  Will the FOMC reduce the rates or not?  Will, the Bond Rates, invert and remain inverted or not?   Will China send troops into Hong Kong to put down the protests or not?  Will the global economic slow down effect the US economy or not?  That uncertainty created another very volatile session on Thursday, and until we get some clarity is likely to continue to create very difficult price action for traders to navigate.

Yesterday T2122 signaled an oversold condition, but with so much uncertainty the market struggled until late afternoon when it finally managed to put together a little relief rally.  A round of good earnings reports after the bell also lifted spirits, and treasury yields somewhat stabilizing during the night has futures pointing to a significant gap up this Friday morning.  The question is, can we trust it, or could it produce a pop and drop pattern or even worse another lower high within the downtrend? Secondly, how much risk will traders be willing to hold into an uncertain weekend?  Nonetheless, any relief rally is a welcome sight after a week of heavy selling. 

Trade Wisely,

Doug

China Retaliation

China Retaliation

Early this morning China announced its tariff retaliation plan quickly reversing futures markets that had initially indicated a bullishness throughout most of the night.  August is typically a difficult month with last-minute vacations and the beginning of a new school year but this year has been particularly challenging with all the political and economic uncertainty.  Sadly, I think the intense price action volatility is likely to continue into the near future.

Overnight Asian markets closed mixed but mostly higher even as China once again lowers their economic growth expectations.  However, European markets are decidedly bearish this morning in reaction to the trade war retaliation from China.  US Futures have fluctuated wildly this morning ahead of several big earnings reports and huge day of market-moving economic reports.  Expect wild price gyrations today as the market digest all the data.

On the Calendar

We have a major decline in the number of earnings on the calendar today with just 45 companies reporting.  However, we have several market-moving notable reports which include, WMT, BABA, AMAT, CSIQ, DDS, JCP, NIO, NVDA, and TPR.

Action Plan

I think it's fair to say that the Trader’s Almanac was certainly right this year about August offering up challenges.  Crossing over the midpoint of August I wish I could say that the volatility is nearing an end but with all the trade uncertainty and global market indicators continuing to flash warning signs of recession I suspect that is not the case.  US Futures most of the night were pointing to a significant rebound from yesterday selloff, but China put the kibosh on bullishness announcing its tariff retaliation plans early this morning.  Off in the distance, you can likely see the tweet-storm clouds building.

Today we have a huge day of economic reports for the market to digest as well as several big earnings reports likely to fuel the fire of volatility.  With futures now indicating another nasty gap down at the open we should expect the 200-day moving average to begin pulling very hard on the SPY.  Expect bond yield inversion fear-mongering to continue today as markets react to China’s tariff retaliation today.  The silver lining in all of this is that great stocks are now at sale prices and when the selling finally ebbs there will be some fantastic bargains to be had.  Until then, protect your capital, wait for your edge to return and hold fast to your trading rules that protect you from emotional decision making.

Trade Wisely,

Doug

Punishing Price Volatility

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Punishing Price Volatility

Punishing price volatility continues today nearly reversing yesterday's sudden and massive rally.  The decision to delay the tariff increase until December 15th suddenly reversed trapping short traders in one of the fastest moving short squeeze rallies I have seen in my trading career.  Unfortunately, that didn’t resolve the bond rate inversion that occurred that is once again punishing those that picked up long positions yesterday. 

Asian markets rallied slightly on the tariff increase delay, but massive protests in Hong Kong dampened the response.  Economic data out of Germany raising concerns of a European recession have their markets seeing red across the board this morning.  Still facing significant technical damage and a bond yield inversion signaling a possible recession in the US, futures are pointing to a sharp overnight reversal with Dow pointing to a gap down of nearly 250 points.  Buckle up as another volatile market day begins.

On the Calendar

The Wednesday Earnings Calendar is the last big day of earnings reports this season with more than 250 companies reporting.  Notable reports include A, GOOS, CGC, CSCO, IHRT, LK, M, NTAP & VIPS.

Action Plan

After the Whitehouse decided to wait until December 15th the market moved up like a rocket has been strapped to its back.  Unfortunately, the trade war is not the only thing the market has on its mind right now, and the rally stopped about as quickly as it began after running into price resistance around the 50-moving average.  This morning the market must come to grips with the 2 and 10-year bond rate inversion which occurred as we slept.  Rate inversion is not a perfect indicator of recession but has accurately signaled it correctly the vast majority of the time. 

Consequently, it looks as if the punishing price volatility will continue this morning with US Futures pointing to a substantial gap down at the open.  Not helping the matter is that European markets have also swooned after a German GDP shrank by 1% fanning the flames of global slow down and recession.  Technically, the indexes continue to have a lot of technical damage to repair despite yesterday’s rally and the punishing overnight reversals have made it nearly impossible to trade except for the very experienced day-traders.

Trade Wisely,

Doug

More Technical Damage

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Yesterday’s slow but steady selloff added to the technical damage of the index charts drawing the first lower high since mid-May.  That officially creates at least a short-term downtrend as traders look for safety amidst, fluctuating currencies and bond yields inching toward the dreaded inversion that often signals a coming recession.

Overnight Asian markets closed lower across the board as protesters fight for greater democracy in Hong Kong, and China threatens military action.   Across the pond, European markets are also modestly bearish this morning in reaction to all the political turmoil.  US Futures currently indicate a flat to slightly bearish open as traders nervously watch bond rates ahead of the CPI report at 8:30 AM Eastern.  With yesterday’s price action, we can’t rule out the possibility of a test of last weeks lows.  However, with market emotions so high anything is possible, so it would be wise to remain focused and flexible.

On the Calendar

On the Tuesday Earnings Calendar, we have nearly 175 companies reporting results today.  Among the notable reports, AAP, EAT, ELAN, JD, TLRY, and YY.

Action Plan

Markets sold off slowly but steadily yesterday as traders closely watched bond rates that continued to inch closer to the dreaded inversion that often signals a coming recession.  More importantly, the selloff created technical damage leaving behind a lower high on the daily chart, which indicates the establishment of a downtrend.  Trade war uncertainty, bond rates, fluctuating currencies, and the massive protests in Hong Kong; it’s no wonder that traders are looking to protect their capital.

According to reports after the bell yesterday, there was a problem that affected the markets during the last 50 minutes of trading where real-time prices were not displayed.  How that may or may not change the look of charts at the open today will be interesting.  Currently, futures are once again getting the morning pump and rallying off overnight lows ahead of earnings reports and the 8:30 AM Eastern CPI report.  At this point, we should not rule out the possibility of a retest of last weeks lows, but with market emotions so high anything is possible so stay focused on price action and remain disciplined to your rules.

Trade Wisely,

Doug

Bearish Pressure

Bearish Pressure

Growing trade tensions and expanding Hong Kong protests and China once again lowering the Yuan overnight has the market under some bearish pressure this morning.  Not helping that sentiment is the fact that Golden Sachs lowered economic growth estimates rising fears of a recession.  If the indexes fail, creating a price action lower high, the technical damage of the charts could become severe and officially mark the beginning of a market downtrend.  The bulls must defend Friday’s low or expect the bears to be emboldened pushing the indexes lower once again.

Overnight Asian markets closed mixed but mostly modestly higher as trade war tensions dampen activity.  European markets currently see modest declines across the board ahead of the US Market open.  As of now, US Futures suggest a gap down open between 150 and 200 Dow points.   Fear could quickly turn to panic selling if Friday’s lows fail as support.  We should continue to expect high price volatility, intra-day new driven reversals, and big overnight gaps making the markets very difficult to navigate for swing and position traders. 

On the Calendar

On the Monday earnings calendar, we have just short of 130 companies expected to report earnings today.  Notable reports today include GOLD, SYY, and TME.

Action Plan

Massive protests in Hong Kong continue to grow spilled into the airport, forcing the cancelation of all flights during the night.  The violence is also growing between police and residents asking for greater democracy and a release from Chinese influence.  So as trade tensions between China and the US grow leader XI Jinping is facing his greatest challenge to his power since coming into office.  Also during the night China once again lowered the midpoint of the Yuan slightly setting the currently below Friday’s session lows.

Over the weekend Goldman Sachs cuts their economic growth forecasts citing the lingering trade war and rising fears of a recession.  After a nice afternoon comeback on Friday that saw indexes recovering the moring session selloff, US Futures are under bearish pressure this morning.  A lower high failure near the 50-day moving average is likely to embolden the bears and creates severe technical damage to the index charts.  If the bulls are unable to defend Friday’s price low, panic could trigger a wave strong selling pushing the indexes past last weeks lows where the SPY and QQQ could test their 200-day averages.  Let’s hope the bulls find enough inspiration in earnings reports to fight hard!

Trade Wisely,

Doug

Bond rate inversion?

inversion

As bond yields inch toward the dreaded inversion and trade war jousting continues, there is certainly plenty of uncertainty to unsettle the markets as we head into the weekend.  With most of this earnings season now behind us, the market will now have to confront its global economic fears directly.  Here in the US jobs numbers remain very strong, and the consumer is still very confident, but as this trade war lingers on and the two superpowers exchange punches anything is possible.

Asian markets finished the week mixed but mostly lower after resetting the midpoint of the Yuan just below the key benchmark of seven.  European markets are seeing red across the board this morning as political turmoil in Italy has bank price plunging.  As we head into the weekend, ahead of earnings reports and the PPI number at 8:30 AM Eastern, US Futures point to bearish threatening to break the 2-day relief rally.  It’s been a wild week, and it looks like the volatility will extend right into the weekend.

On the Calendar

On Friday’s Earnings Calendar we get a little break with just over 100 companies reporting today.  Next week we have just two triple days of reports with the vast majority of reports this quarter now in the rearview mirror.  With mostly small caps reporting today, there are none that I would consider particularly notable.

Action Plan

Trade war fears are once again raising it’s ugly head this morning as China now plans to stop receiving US crude imports as its next punch in the fight.  Oil has already declined sharply as concerns of global growth have spread in recent months if China reduces its imports oil prices will likely remain under pressure.  Another major market concern is the possible yield curve inversion between the 2 & 10-year bonds often as a signal of recession.  With the vast majority of earnings season behind us, the market will directly confront its overall economic fears in the coming weeks.

As a result, there is a lot of uncertainty as we head into the weekend, and traders should carefully consider how much risk they want to carry.  With the market very sensitive to bond and currency fluctuations, anything is possible over the weekend.  After 2-days of a relief rally that moved the indexes up sharply, they will now confront significant price and key moving average resistance.  Currently, US Futures are pointing to a gap down open of more than 100 Dow points to kick off Friday’s volatility.  I wish you all a wonderful weekend.

Trade Wisley,

Doug

Bonds Rates Stabilize

Stabilize

It was a nice relief to see the markets begin to rally off of morning session lows as bond rates began to stabilize after their wild morning fluctuations.  As great as it was let’s not forget that a bounce off the lows does not make a trend and that there are still significant price resistance levels and technical damage the market must overcome.  Yesterday was a positive beginning, but now we need the price to follow-through with additional bullish price action.  Keep in mind the Bear’s may have retreated yesterday, but we can’t rule out the possibility they are just regrouping for another attack.  They are unlikely to give up easily.

Asian markets saw green across the board at the close after China took further steps to stabilize the Yuan.  European markets are showing modest gains in response to bond rate stabilization.  Ahead of a huge day of earnings reports, the US Futures are currently flat but have leaned to the bullish most of the morning.  I would expect another day of challenging price volatility and would not rule out the possibility of additional bear attacks.

On the Calendar

Today we have the biggest day of earnings reports with more than 500 companies fessing up to results.  Notable reports include AL, AU, CAH, CBS, KHC, MGA, MUR, PRTY, SNH, VIAB, VIRT, YELP, and YPF.

Action Plan

The rally off of yesterday’s lows corresponded directly with the stabilization of the bond rates that moved around erratically during the morning session.  That sweet relief rally recovered all the morning losses and even managed to push into positive territory by the close of the day.  However, let's not mistake a one-day rally as a recovery.  We need bullish price action following through today to confirm the relief rally is truly underway.  Let’s also keep the markets still have to deal with substantial technical damage creating significant resistance levels in the charts.

Futures have traded in the green during the entire overnight session after China took additional steps to stabilize the Yuan.  Volatility is likely to remain high with more than 500 companies reporting earnings today, so prepare for the challenging price action to continue.  As of now, I’m expecting the relief rally to continue, but we must all be on our toes for the possibility of sharp intra-day reversals particularly if bonds rates experience any aftershocks.  Plan your risk carefully.

Trade Wisely,

Doug

Relief Rally, Maybe?

Relief Rally Maybe?

It’s always nice after such a strong sell-off when a relief rally begins.  However, with so much technical damage to the charts, I would be carefully finding too much comfort in the rally.  Trader’s should stay vigilant watching for clues of potential price failures at or near price resistance levels and key moving averages.  We should also be on guard for the possibility of overnight reversals as we plan our risk forward.  There can be an opportunity in high volatility times for experienced day-traders, but the path ahead for swing and position traders could be very challenging.

Asian markets closed mixed but mostly lower as China followed-through stabilizing the Yuan at a level slightly lower than expected.  European markets are embracing the calming of the currency fluctuations with their indexes seeing green across the board.  The early evening futures bearish reversed during the night now suggesting a modestly bullish open ahead of a very busy day of earnings reports that may prove to support the relief rally or bring back the bears is the result disappoint.  Plan your risk carefully in this fragile market environment.

On the Calendar

We have another very busy day on the Earnings Calendar with over 430 companies reporting quarterly results.  Among the notable are, LYFT, STMP, DDD, UHAL, AIG, CVNA, CTL, CDE, CVS, FOXA, HL, LAMR, LBYTA, LL, NRG, OMI, PAAS, DOC, RYN, RCII, SFLY, SWKS, TEVA, TRIP, UPWK, and VER.

Action Plan

During the early evening, futures were moving lower after some disappointing earnings results from DIS.  However, things began to improve after the Asian markets opened, and China followed through stabilizing the Yuan.  As a result of the escalating trade war tensions, Morgan Stanley is the first to lower earnings expectations for the next 2-years.  It would seem in the eyes of Morgan Stanley the trade war uncertainty is here to stay.

Although the relief rally that began yesterday appears to be following through with more bullishness ahead to the open, I’m not sure we can gain much comfort in the move due to the tremendous technical damage in the charts.  As the indexes try to recover, we must stay on our toes watching for clues of potential lower high failures at or near price resistance levels or key moving averages.  The huge number of earnings reports, yet this week could help the price recover, but it could also trigger the next wave of selling should the results disappoint.  The high volatility can provide opportunities for adept day-traders; however, swing and position traders are likely to find the price action very challenging.  Remember trading every day is not a requirement, and Cash is a position often underutilized in times of market turmoil such as this.

Trade Wisely,

Doug

Currency Manipulator?

Currency Manipulator

In the early evening, it looked like we could be in for a very nasty day after the US Commerce Dept. officially labeled China, a currency manipulator.  US Future plunged more than 600 points as it appeared the Trade War had devolved into a very dangerous currency war.  Luckily cooler heads prevailed as China finally took steps to stabilize the Yuan during the night and lifting the US Futures into positive territory.  With 400 companies reporting earnings today and market emotions at a fevered pitch, we should prepare for very the challenging price volatility to continue.

Overnight Asian markets saw red across the board at the close though they recovered substantially from early session lows.  European markets have turned modestly bullish this morning in reaction to the stabilized Yuan slightly eased trade war tensions.  Ahead a big day of earnings reports, the US Futures point to a bullish open, with the Dow currently suggesting a gap up near 200 points at the open.  With such wild volatility, we should not rule out the possibility of a pop and drop pattern, so stay on your toes and remain focused on price action for clues.  Anything is possible when emotions are so high.

On the Calendar

We have a big day on the Tuesday earnings calendar with 400 companies set to report results.  Some of the notables include ANDE, AINV, WT, ADM, BDX, APRN, CRCM, DIS, DISCA, DUK, ENR, STAY, FLT, FTR, HST, HUBS, NDLS, NUS, OIH, PBI, PAA, RHP, SSTK, SWN, VOYA, WYNN & ZAGG.

Action Plan

There was a lot of futures turmoil after the bell yesterday when the US Commerce Department officially labeled China, a currency manipulator after devaluing the Yuan.  At one point the Dow Futures indicated a gap down of more than 650 points during the early evening as it appeared the trade war had evolved into a very dangerous currency war.  Fortunately, during the night, China took measures to stabilize its currency, and the US Futures breathed a sigh of relief not only recovering the losses but moving back into the green.  Whew, that could have been ugly!

As I write this, the US Futures are pointing to a bullish gap up around 200 points ahead of a huge day of earnings reports.  Although I think the odds of testing the overnight futures lows have declined significantly over the last few hours, we can’t completely rule out the possibility considering the harsh volatility the market is currently experiencing.  Emotions are high, so prepare for challenging price volatility fueled by news and earnings reports to test the metal of even the most experienced traders.

Trade Wisely,

Doug

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