With high hopes of future rate cuts and fingers crossed for a
G20 trade deal to end the trade war, trade and investors push the SP-500 to new
record highs. Now with tensions rising with
Iran the question becomes can the other indexes follow suit and carve out new
records as the weekend approaches. Although
it seems very likely at this point that the markets desire new highs we should
not rule out the possibility of some profit-taking to reduce weekend risk.
Asian markets closed mixed but mostly lower overnight and
European markets are now modestly higher.
US futures that were lower all night have been creeping up all morning trying
to put on a brave face before the open an ahead of the Existing Home Sales report
expected at 10 AM Eastern. As we head
into the weekend I’m not sure possible reward is worth the risk of adding new
positions today.
On the Calendar
On Friday’s earnings calendar we have three companies reporting
quarterly results with only KMX notable.
Action Plan
Futures are taking a little rest this morning after the
SP-500 closed at new record highs on the hope of future rate cuts. The DIA had a new closing high record and
came very close to printing an all-time high for the index while the QQQ and
IWM lag. According to reports the President
had authorized retaliatory air strikes against Iran for the shooting down of a
drown over international air space.
However, the strike was called off but tensions continue to escalate.
After such a huge run-up in prices, mounting Iran tensions,
the G20 just around the corner with hopes of a trade deal and facing a weekend
buying new positions could be very difficult for traders. In fact there could be some profit-taking
emerge to lower weekend risk as we move through the day. Currently future are pointing to flat or
modestly lower open. I still think the
market will seek out new record highs in the DIA and QQQ in the near future but
I’m not sure the potential reward is worth the risk heading into the weekend.
Due to a computer problem there is no morning note or written blog. However, I was able to finish the Morning Market Prep Video and you can access it with button below.
All eyes are on the FOMC decision & forecast. Will they, won’t they, how much or how little
will they do to stimulate the economy?
Certainly the market has rallied significantly with the hope of rate
cuts. Will the Fed do enough to support such
strong anticipation or will they disappoint the market? It’s a tough call as US economic data
continues to show strength and the market is nearing a test of all-time
highs. What they do will not be nearly
as important to traders than how the market reacts to the news. Pop some popcorn the show is about to begin.
Asian markets closed higher overnight as they reacted to the
positive US/China trade developments. Negotiations
will resume and leaders will meet at the G20 attempting to find a compromise to
the current trade war. European markets
as well as the US Futures are rather subdued this morning as the world waits
for the FOMC decision on interest rates and their future forecast. It would be normal to expect light and choppy
price action as the market waits but at 2 PM Eastern anything is possible as
the market reacts. Plan your risk carefully.
On the Calendar
On the hump day Earnings Calendar we have only 11 companies
reporting quarterly earnings. Notable
reports include ORCL, SCS & WGO.
Action Plan
After yesterday’s 350 point Dow rally and facing the FOMC
rate decision one wonders if there will be anything to do until after 2 PM
Eastern today. Of course the wording in
the FOMC statement will be very important but I believe the market will be most
interested in the forecast and the possibility of not just one rate cut this
year. Expect choppy price action as the
market waits for the decision and then anything is possible as the market digests
the statement, forecast and press conference.
An apparent successful phone conversation with the President
and Chinese Leader raised hopes a forthcoming trade deal after confirmation they
will meet at the G20 to discuss trade.
Although many are saying the offs of a deal at the G20 is very slim the
market seems to be very hopeful a compromise is possible. Never say never but I wonder if a US/China
deal occurs will the FOMC see a need to lower rates? Only time will tell.
Asian markets closed mixed overnight without the benefit of
the ECB news clearing the deck for rate cuts and further asset purchases. European markets are bullish across the board
this morning on the news and the US Futures have rallied sharply on the news as
well. There is nothing quite like the
smell of freshly minted money to inspire the bulls.
Ahead of the Existing Home Sales report at 8:30 AM Eastern Dow futures are pointing to more than a 100 point gap up with the Nasdaq leaping substantially higher as well. Remember not to chase the morning gap. Wait for proof that buyers will support the gap just in case the bear’s step in to defend resistance levels. Also keep in mind there could be a significant risk of loading up on positions ahead of the FOMC announcement at 2:00 PM Eastern, Wednesday. Plan your risk accordingly.
On the Calendar
On Tuesday’s Earnings Calendar we have 30 companies
reporting today. Among the notable are
ADBE, AMED, KHC & LZB.
Action Plan
Yesterday’s expected choppy price action is giving way to
bullishness this morning on the news that the ECB has cleared the way for
potential rate cuts and further asset purchases if inflation doesn’t’ reach its
target. Markets love the smell of
freshly printed money and US Futures are no different rallying on the
news. Today begins the 2-day FOMC
meeting and the market is expecting an action similar to the ECB.
Technically speaking yesterday consolidation price action
was productive. The DIA and SPY held above
their respective 50-day moving averages and the QQQ crossed back above its
50-day and managed to hold just 16 cents above by the close. Futures are currently pointing to a Dow gap
up open of more than 100 points but we still have to clear the Existing Home
Sales hurdle at 8:30 AM Eastern.
World markets are watching and wondering, will they or won’t
they cut interest rates in June or will the FOMC wait until July. Recent strong economic numbers seemed to have
lowered the odds of a June rate cut but the odds of a July cut seem to be
rising. One thing for sure is we all
have to wait for there decision and forecast on Wednesday at 2:00 PM Eastern
time.
As we wait it would not be surprising to light and choppy consolidating
price action. With the DIA and SPY hold
above their 50-day averages and the QQQ and IWM remain below the directional uncertainty
of market is palpable. Futures are
pointing to a modestly bullish open ahead of today’s economic reports so be
careful not to chase. Baring some surprise
news or a presidential Tweet Storm I
would expect anemic and pensive price action until the FOMC Announcement.
On the Calendar
On the Monday Earnings Calendar we have only 11 companies
reporting quarterly results but none are notable very unlikely to move the market
today.
Action Plan
The FOMC will be the predominant focus of the market until their
rate announcement and committee forecasts on Wednesday at 2:00 PM Eastern. Strong economic numbers last week seems to
have lower the odds of a June rate cut but most are expecting the Fed will make
its move in July. I think the bigger
question is will the FOMC forecast suggest one, two or even more possible rate
cuts this year? Other questions to
ponder, What if there is a US/China trade deal at the G20 meeting? If so, will there be any need for the FOMC to
cut rates?
With so many big questions it would not be out of the
question to see pensive price action as the world waits for the FOMC
decision. US futures currently point to
a modestly bullish open ahead of the 8:30 AM Eastern Empire State Mfg. Survey
and Housing Market Index report later this morning. Unless we have some big breaking news or a
Tweet Storm expect a relatively quiet market until Wednesday afternoon.
Another day another overnight gap as the market reacts to a chemical
tanker fire in the Gulf of Oman creating a surge in oil prices. The cause of the fire is still unknown but has
sparked fears of an attack after apparent sabotage of another tanker just a few
weeks ago. US futures are pointing to a
gap up open reversing the modest selling yesterday and holding the key psychological
50-day moving averages of both the DIA and SPY.
The QQQ is also getting a lift this morning an looks as if
it will once again challenge its 50-day average resistance. Short traders expecting more of a pullback
after the sharp rise could find themselves in a short squeeze. Expect price volatility to remain high challenging
even the most experienced traders with the hypersensitivity to US/China trade rhetoric.
On the Calendar
On the Earnings Calendar we have the biggest day of the week
with 28 companies reporting. However,
the only notable report is DLTH.
Action Plan
Oil prices are surging this morning after a tanker incident
in the Gulf of Oman. The cause of the fire
remains unclear, but is raising fears of an attack just weeks after an apparent
sabotage of another tanker. Futures traded
modestly lower as Asian market closed mostly lower overnight but rallied significantly
with the surge in oil prices.
As I write this Dow futures point to a gap up open of more
than 75 points reversing yesterday’s modest selling and holding the DIA and SPY
above their 50-day averages. The QQQ
looks to challenge its 50-day average as resistance at the open. Could this create another pop and drop day? Yes, but it could also create just enough catalyst
to squeeze short traders out pushing the indexes higher.
The bearish engulfing candle patterns left behind on the DIA, SPY and IWM yesterday suggest the wild bullish rally may have run out energy but I would not expect the bulls to give easily. Logic alone would suggest after such an energetic rally that little rest or pullback is likely. However, if the bulls can defend the reclaimed 50-day morning averages as support a case for attacking all-time market highs is possible.
Unfortunately tough talk between US/China is not suggesting
that a trade deal between the countries is unlikely at the G20 meeting seems to
have given the bulls a little pause this morning. Asian markets closed lower as their consumer
prices hit a 15 month high and food prices spiked 7.7% in the May report. European markets are also seeing some bearishness
this morning with all indexes pointing modestly lower. As the bulls and bears battle for control
expect higher price volatility and sensitivity to trade news.
On the Calendar
On the Wednesday Earnings Calendar we have just 15 companies
stepping up to the plate. Notable
reports include LULU & TLRD.
Action Plan
Tough talk suggesting that a US/China trade deal is very unlikely
at the G20 seems to have dampened the bullishness we have seen in the last week
of price action. During the night China
released consumer inflation numbers showing a 15 month high and food prices
spiking 7.7% in May. Asian markets
closed lower across the board overnight as a result. European markets are also seeing red this
morning across their major indexes.
As I write this US futures are modestly lower bouncing off
the overnight lows but the CPI number at 8:30 AM Eastern has the potential to
move the market before the open today.
The DIA, SPY and IWM all left behind bearish engulfing patterns yesterday
suggesting a lower print but I would not expect the bulls to give up control easily. Expect high price volatility and the possibility
of quick intraday reversals as they duke it out. We should be just fine if the bulls defend the
reclaimed 50-day moving averages as support but if these key psychological levels
fail the bears could be emboldened.
Is the move irrational behavior? Goldman Sachs has warned that it is and the
conspiracy theorists come out of the woodwork proclaiming a rigged market. The fact is the market wants to go up for the
time being. Fight it and you’re likely
to lose because a market can remain irrational much longer than we as retail
traders can stay liquid! Follow the price
action and avoid predicting. Could today
bring in the sellers? Yes, but it could
also inspire the bulls to keep pushing higher.
Relax, focus on price and it will lead the way.
Who would have guessed the hope of a federal funds rate cut
from 2.5 percent to 2.25 percent would have the power to reverse market sentiment
lifting the Dow more than 1250 points in just 5-days of trading. This morning with fresh presidential tariff
threats making headlines the US futures point to yet another gap triple point
gap up.
On the Calendar
We have just 19 companies fessing up to their quarterly
results today. Notable reports include
Play & HRB.
Action Plan
The power of the assumed future interest rate cut continues
to propel the bulls higher even as signs of a weakening economy emerge in the
US and continued threats of tariff increases from the Whitehouse. The biggest part of yesterdays move occurred in
the overnight gap and according to the futures we can expect yet another gap up
of more than 100 Dow points.
In the past I would try to figure out such price movements that
seem to be completely irrational. I
would attempt to countertrend trade these relentless moves only get run over by
market momentum. Here are the simple
facts. The bulls are currently in
control and they currently believe the market should be valued higher! Personally I don’t believe that is right but
what I think or feel has no bearing on what is occurring. Trade the chart as it is not as you think it
should be because the market doesn’t care what you think. Could this turn out to be an irrational rally? Yes, it could but it could also just keep
going up. Focus on price action and it
will lead the way.
What a massive reversal of market sentiment as the bulls
find even more energy to extend this incredible relief rally. Is this irrational exuberance? Perhaps, but it
would be very unwise to try and fight it or predict when it will be over. Remember the market can remain irrational
much longer than you can remain liquid if you try to fight the bull.
Asian markets closed higher on better than expected trade
surplus numbers. European markets are
bullish but subdued ahead of UK economic data this morning. US Futures point to more than a 100 point Dow
gap after avoiding tariff increases with Mexico and news of a huge merger between
United Technologies and Raytheon creating the 2nd largest defense
company in the world. If your long this
morning remember gap are gifts taking profits or scaling. Never allow greed to get in the way of taking
a profit. If you miss this rally then
for goodness sake don’t chase it this late in the move with the fear of missing
out. Stay disciplined and exercise
patience waiting for the next entry.
On the Calendar
On the Earnings Calendar we have about 30 companies reporting
their quarterly results today with none that are particularly notable unless
you happen to own one of them. Make sure
always to check earnings dates a part of your market preparation.
Action Plan
A deal with Mexico to avert tariffs, a larger than expected
China trade surplus and a merger or United Technologies and Raytheon continue
to inspire the bulls higher this morning.
US futures are suggesting more than a 100 point gap in an already very
extended relief rally even as the president expresses the willingness to add
300 billion in Chinese tariffs. Is this
over-exuberance and a bit nonsensical?
Maybe, but as a retail trader it’s unwise to fight the bull or try to
predict its conclusion because they can run right over you.
While I feel this relief rally is very extended and this
mornings gap has the potential to end as a pop an drop I must stay focused on
the price action trading what is not what I think it should be. As Jessie Livermore once said, “The Market is
never wrong but opinions often are”. Stay
disciplined to your rules taking profits or scaling out not allowing greed to interfere
with taking profits. Remember gaps are
gifts! If you have missed this rally then
for goodness sake don’t chase it with the fear of missing out. Be patient and wait for the next entry based
on good price action and analysis rather than emotion.
There may be some light at the end of the tunnel this morning with news Mexico has made concessions that could avert the 5% tariff increase on Monday. That would be a welcomed relief and the US futures point to a bullish open ahead of the Employment Situation report. Asian market closed mixed overnight but European indexes are green across the board this morning.
With possible interest rate cuts in the signaled by the Fed
the 8:30 AM Eastern Employment Situation report could create a significant price
reaction upon its release. If you’re
rooting for a rate decrease a miss of the 180K consensus estimate is likely to
help Fed or even speed up their action. A
strong jobs number could impede or slow the FOMC decision and receive a
negative market reaction. No matter what
happens consider the risk carefully you carry into the weekend after such a
steep market rally.
On the Calendar
We have a light day on the Earnings Calendar with only 16
companies reporting. Looking through those
set to report but none are particularly notable.
Action Plan
According to reports Mexico has made concessions that may
avert the 5% increase in Tariffs scheduled for June 10th. If true that is very good news for US car
manufacturers and a welcome relief to the overall market. US Futures are once again looking to extend the
relief rally that has recovered more than 900 Dow points in just three days so
far.
Of course the Employment Situation report at 8:30 AM Eastern
will have something to say about how the market opens today. If the number comes in less then the 180k
consensus estimates the market may see that as good news supporting the idea of
lowered interest rates in September. Should
the number come in strong the market may see that negatively as it works
against the hoped-for rate cut. One thing
is certain this will be a heavily watched report that may inspire a significant
market reaction upon its release. Having
seen such a steep rally this week consider the weekend risk as you plan your day. Have a great weekend everyone.
