The extraordinary rally is a welcome relief but not one must
wonder if the exuberance of the potential interest rate cut is now overextended. One thing for sure is that we have moved a
long way in a very short period of time and a little pullback would not be out
of the question. Be careful not to
chase. Asian market closed mixed but
mostly modestly lower overnight. European
markets are currently green across the board as they await an ECB rate
decision.
With the DIA, SPY and QQQ back above their respective 200-day
averages repairing some of the technical damage in the charts but that will
only be true if the bulls can prove to hold them as support. We have the big Employment Situation number
Friday morning so don’t rule out the possibility of light and choppy price
action after the morning rush as we wait.
Remember some profit taking could begin at any time with the Dow having
risen more than 700 points in just two days.
On the Calendar
We have fewer than 30 companies reporting quarterly results today. Notable reports include OllI & SIG.
Action Plan
After two big days of rally on the hope of an interest rate
cut futures are once pointing to a modestly bullish gap up open. However that could certainly increase or
decline as we move toward the open with International Trade, Jobless Claims, as
well as Productivity & Cost numbers at 8:30 AM Eastern. It will be interesting to see if the bull can
maintain their enthusiasm after Goldman’s warning that the market has overpriced
the possible Fed cuts.
This morning we are also waiting on an ECB rate decision. A surprise cut or increase across the pond
has in the past moved US markets significantly in the past so keep an eye on those
early morning futures. Although the
indexes are still well below their 50-day moving averages the DIA, SPY and QQQ have
pop above their 200-averages reliving some of the technical damage. If some profit takers do soon come in holding
above these key averages will be very important. Remember we have the Employment Situation
number Friday morning so after the morning rush don’t be surprised to light and
choppy price action as wait.
According to new reports the Fed is leaning toward an
interest rate cut and the prospect of low-cost money has futures suggesting a substantial
gap up this morning. Asian markets
closed mixed but mostly higher overnight and although Europe is pondering a
punishment for Italy’s continued deficit spending their indexes are bullish
across the board this morning. But does
that mean we should throw caution to the wind and chase into this morning gap?
No.
The fear of missing out is a powerful emotion but considering
the magnitude of the move over the last 24 hours chasing in could prove to be a
painful lesson in patience. Consider the
possibility of a pop and drop which would not be out the question after such a
big reversal. Gaps are gifts and I in
fact will be looking at the morning gap as a reason to take profits. Maintain your discipline waiting to see if
buyers step up to support the morning gap before considering new long positions.
On the Calendar
On the hump day Earnings Calendar we have just under 30
companies reporting. Among the notable are
FIVE & VRA.
Action Plan
The top story splashed across my CNBC app this morning is “The
Fed is indicating that a rate cut is coming”.
Markets love the prospect of lower cost money and we see both Asian and
European exchanges rising on the hope. Consequently,
the US futures are signaling a sharp gap up this morning around 150 Dow
points. That would constitute about a
650 point rise in just over 24 hours. As
exciting as that is, too much of a good thing in such a short period could bring
out the profit takers.
The fear of missing out is a very strong emotion but chasing into the open after such a big reversal in price can prove to be a very expensive lesson on patience. A lesson, that had to be taught to me more times than I care to admit. Rather than chasing into positions on big moves such as this I use it to take profits and scale out of trades. Gaps are gifts that I tend to open regularly to collecting the gains and lowering the risk of the volatile price action. I’m not trying to predict anything but this mornings gap could easily set up a pop and drop. Stay focused and maintain your discipline waiting to see if buyers step up to support the morning gap before considering new long positions.
With the news the DOJ may begin anti-trust investigations of Google, Amazon and Facebook the QQQ dipped into correction territory yesterday. Amid all the current market uncertainty they choose now to pile on more uncertainty? There timing is impeccable considering that Fed member James Bullard said it might be necessary to lower rates sooner than later to deal with the economic impacts as the trade war uncertainty persist.
Futures are pointing to gap up open around 100 Dow points and
perhaps signaling a relief rally may be in order. Remember a relief rally can be very brief so
don’t mistake a little short covering as a recovery. We have significant technical damage that
needs to be repaired as well as key price resistance levels above that must be reclaimed
before recovery can begin. Consider your
risk carefully and remember price volatility is likely to remain high.
On the Calendar
On the Earnings Calendar we have just 19 companies reporting
quarterly results. Notable reports
include GME, CRM, CBRL & TIF.
Action Plan
It seems rather remarkable amid trade war concerns, Mexican tariffs and global slow down worries the DOJ has decided to begin anti-trust investigations against Google, Amazon and Facebook after years of complaints. Their timing is impeccable don’t you think? James Bullard a voting member of the CBOE suggested yesterday that trade war concerns may warrant a reduction in the interest rate raising fears of economic impacts. His comments created significant price volatility as the market grappled with the implications.
US Futures are currently suggesting a gap up of more than 100
points this morning and perhaps signaling a relief rally to test resistance
levels of price and downtrend. There is
tremendous technical damage so I would not expect the bulls to rush back in a
big way but perhaps we have found at least a short-term bottom after the QQQ officially
reached correction territory yesterday. Be
careful not to chase the morning gap to avoid the possible pop and drop pattern
like we experienced yesterday. Remember
volatility is likely to remain high so intra-day whips and reversals may challenge
the resolve of even the most experienced traders.
As the President makes a European tour and dines with the
Queen global trade uncertainty are having seeing impacts on markets around the
world. Asian markets closed lower and
European are also in the red this morning on the deepening uncertainty. US futures have recovered significantly from
overnight lows but continue to point to lower open this morning.
There is nothing to inspire the market on the Earnings
Calendar this morning so hopefully the PMI & ISM numbers will help provide some
clarity to calm the nerves of traders and investors. Although we can expect the price action volatility
to very challenging the short term oversold condition could provide us at least
a modest relief rally in the near future.
Unfortunately, considerable technical damage and price resistance above does
not favor a speedy recovery unless we find some resolutions to the trade uncertainty.
On the Calendar
On the Earnings Calendar we have just 20 companies reporting
with nothing particularly notable today.
Action Plan
Swirling uncertainty continues to plague the market as China
ramps up the rhetoric issuing a white paper blaming the US for the Trade
War. Asian markets closed modestly lower
across the board. As the president makes
a European tour there markets are also modestly lower as global trade worries
deepen. As a result, US Futures reflected
the uncertainty being down nearly 175 points during the night but slightly recovering
as we move toward the open.
Perhaps the PMI Mfg, ISM Mfg and Construction Spending
reports on the Economic Calendar this morning can help to provide some clarity
and settle the nerves of traders and investors.
As the technical damage deepens expect price action volatility to remain
very challenging with sudden overnight and even intr-day new driven reversals. Anything is possible if more bad news is
released but the short-term oversold condition will have me watchful for at
least a modest relief rally in the near future.
With illegal boarders crossings reportedly rising to 4500
per day the President shocked the market yesterday afternoon with punitive tariff
increases on Mexican goods. The tariffs
will begin with a 5% increase on June 10th with an increase to 10%
in July and 25% in October unless Mexico takes steps to stem the tide of
illegal crossings.
The shock and uncertainty of this action have the futures
pointing to a substantial gap down this morning that threatens to break some
key price support levels. Raising this
much uncertainty ahead of the weekend has the potential to create some panic
among already battered traders and investors.
Buckle up the road could be very bumpy ahead.
On the Calendar
A light day on the Earnings Calendar as we begin to wind down
the second quarter earnings season. The
only particularly notable report today is BIG coming out before the bell.
Action Plan
Yesterday’s choppy price action reflected the uncertainty the
faces leaving behind more questions than answers. After the bell the President then surprised
the everyone announcing he will raise tariffs on Mexico by June 10th
if they don’t begin to stem the tide of illegal crossings that are overwhelming
border enforcement. According to reports
the US is currently holding over 80K illegals with approximately 4500 added
each day. According to the Whitehouse
the tariffs will be at 5% and increasing to 10% in July and 25% shortly after
that if the problem persists.
This morning the futures are reacting strongly to the surprising
news suggesting a gap down of more than 200 Dow points at the open. Grappling with the possible ramifications and
uncertainty of it all has the potential to trigger a bit of panic selling if
key supports fail with the weekend approaching.
The best we can do is stay focused on the price action and disciplined to
our rules, avoiding emotional decision making that often creates costly mistakes.
Although yesterday’s selloff created a lot of technical damage
it also offered a glimmer of hope for at least a little relief rally. With the Dow having tested the psychological support
of 25,000 and the SP-500 testing its 200-day average both indexes left behind hammer
candle patterns that indicate at least a short-term bottom is possible. Keep in mind that hammer patterns require follow
through to be confirmed and that relief rallies may be very short-lived but a
little break in the selling would is nice just the same.
Currency fluctuations, slipping bond rates and sharply
rising grain commodities will continue to weigh heavily on the mind of the market
let alone the happens in the trade war. The
market is still very sensitive to the news cycle so stay on guard for the
possibility of very quick reversals and high price volatility to continue challenging
traders skills.
On the Calendar
On the Earnings Calendar we have just under 60 companies
reporting today. Among the notable
reports DG, COST, BURL, CSIQ, DELL, DLTR, EXPR, GME, GPS, LULU, MOV, NTNX, ULTA
& VMW.
Action Plan
Spending considerable time looking through charts last night
there is now widespread technical damage across the majority of market sectors. Having said that there is also a glimmer of
light for a relief rally after the DIA tested 250 and the SPY found support at
its 200-day average yesterday. Please
note that I didn’t say recovery because there is still a lot of work needed before
occurs but a little relief rally would certainly be nice even if it’s very
short lived.
Although currency fluctuations and slipping bond rates have
the market on edge future are currently pointing to a modestly higher open
today. The GDP number, International Trade
report and weekly Jobless Claims that all come out at 8:30 AM Eastern could lift
the market spirits or dampen them quickly if the numbers disappoint. Expect price action volatility to remain very
challenging with quick reversals due to news sensitivity.
The market could sure use a positive story but today the
hits keep coming. The US as nine countries
to their monitoring list of possible currency manipulators. China threatens to withhold rare earth
minerals essential to technology manufacturers.
Extreme weather and flooding across the majority of the gain belt is
seriously delaying crop planting raising commodity prices sharply and raising
concerns about future food prices.
Currently futures are pointing to a substantial gap down at
the open threatening to break important price support levels this morning. The odds of a 200-day moving average test in SPY
and the QQQ are rising and Dow could easily slip to 25,000 if the sellers begin
to pile on and fear of global slow down grows. Expect increased volatility in prices and keep
an eye on VIX as fear could quickly spike.
On the Calendar
Less than 40 companies expected to report earnings today with
retail in the spotlight. Notable reports
include, ANF, UHAL, BMO, CHS, DAKT, DKS, GES, PANW, PVH, TLYS, VEEV & VRNT.
Action Plan
Markets around the world are reacting negatively this
morning as currencies decline and commodities soar. The US added nine countries
to its monitoring list of potential currency manipulators. As a result the currencies weakened against
the dollar putting pressure on stock prices.
In the next move of the trade war, China threatens to cut off rare earth
minerals which are essential to technology companies. Adding insult to injury grain commodity prices
are rising sharply as weather events in the US have seriously delayed crop
planting as flooding across the grain belt continues this spring.
Futures are pointing to a triple-digit gap down this morning
with the all four of the major indexes threatening to open below key support
levels. If the seller pile on this
morning we could see the DIA slip to 250, the SPY tests its 200-day average
around 277 with the QQQ’s doing the same around 174. Keep a close eye on the possibility of a fear
spike that could greatly increase price volatility for the near future.
Friday’s big morning gap that ended up going nowhere as
volume quickly dried up heading into a 3-day weekend left behind more questions
than answers. While all four indexes remain
in downtrends the Friday gap left behind indecisive candle patterns on the DIA
and SPY while the QQQ printed a bearish engulfing just above key price
supports. With futures currently
pointing to flat or modestly lower open which way we go is anyone’s guess.
Although it would be nice to get some directional answers
today it’s possible we could see another day of light and choppy price action
as traders may have extended their holiday vacations through today. With the SPY and QQQ hovering near the midway
point between their 50-day and 200-day averages stay flexible and focused on the
price action for a directional clue. Remember
that currently downtrends are still in force at this time.
On the Calendar
We have less than 60 companies reporting earnings
today. Notable reports include BNS, BAH,
HEI, NIO, WDAY & YY.
Action Plan
Futures opened positive and remained positive most of the night
with Asian markets closing positive across the board as Trump concluded his
visit with Japan in hopes of striking a trade deal. Unfortunately, European markets are lower
this morning on fresh worries of Italy’s growing deficit. It would seem the Italian concerns are also
weighing on the US Futures as well in the pre-market, currently suggesting a
modestly lower open.
Friday’s price action seems to have left more questions than
answers with indecisive price action ahead of the 3-day holiday weekend. Although the QQQ finished Friday holding onto
key support levels it also left behind a concerning bearish engulfing pattern
as concerns that the trade war may transition into a tech war with China. Although hopeful for better price action today
it would not be abnormal to see struggle with light volume as many traders
extend their holiday vacation one more day.
Wild gaps continue to chop up traders accounts that try to
hold positions overnight. Thursday’s gap
down trapped long traders and those that held short positions overnight will this
morning fell the bite of the trap. I’ve
been warning that for a while that the current market condition favors day
traders has certainly been validated this week.
Now facing an uncertain holiday weekend traders have some
big decision to make. Hold positions into
the weekend rolling the dice for the Tuesday open or close positions to avoid
the risk? I for one choose the latter
and will slide into the weekend with my capital and weekly gains tucked safely away. After the morning rush we could see light and
choppy price action as trader’s head for the door to get an early start to the
weekend. Consider your risk carefully!
On the Calendar
We have a light day on the Earnings Calendar with only 13
companies reporting. Notable reports
include BKE, DXLG, FL, and HIBB.
Action Plan
This morning the futures are pointing to a significant gap which
I am very happy to see but I struggle to understand the bullishness. UK Prime Minister Theresa May resigned this
morning and European markets are responding higher on the news. Perhaps, the US markets see this as a signal
that Brexit will not happen. Yesterday’s
gap trapped those holding long positions and it looks like this morning we will
trap those holding short positions just before the long holiday weekend.
The markets wild movements have certainly confirmed my point
that swing traders have no edge and this is a day traders market. With the big gap up it is entirely possible
that a short squeeze rally could be triggered this morning. It’s also very possible the morning gap finds
no buyers ahead of the long uncertain weekend and a pop and drop pattern is the
result. After the morning rush I would
not be surprised to see the price action become very light and choppy as
traders shut down early to begin their holiday.
Stay focused on price action and consider the risk carefully you carry
into the weekend.
I don’t know about you but I am becoming weary and
frustrated with the daily overnight gaps and this morning we have another big
one. Asian markets closed lower across the
board as the country stepped up their rhetoric increasing trade war tensions and
elevating market fears that this could go on and on. European markets are currently trading in red
across the board as well with their added political uncertainty.
As a result the US futures point to a Dow gap down of more
than 200 points at the open with the tech sector getting hit particularly
hard. As always we must be careful not
to chase the gap but wait patiently to see if sellers support the gap or if
this another bear trap as we’ve experienced several times during this downtrend. With all the overnight gaps and reversal
swing traders have little to no edge and although the price action has been
very challenging it currently favors experienced day traders. Be very careful and remember a big part of a
traders job is to protect your capital and if you have no trading edge then
that becomes job number one!
On the Calendar
On the Earnings Calendar we have over 50 companies reporting
results today. Notable reports include,
BKE, DXLG, FL & HIBB.
Action Plan
Another day another overnight gap and today it’s a doozie as
trade war tensions grow. Over the last
few days there has been a growing hope that the indexes could recover their
50-day moving averages. Unfortunitually,
today’s gap down confirms the failure a raises the odds of a retest of May lows
and the possibility of even a deeper selloff.
The current rhetoric coming from both countries suggests this stalemate in
negotiations could be long-lasting.
As with any large gap be careful not to chase it short. We must be patient making sure sellers
support the gap after the open. This
morning’s move certainly has the potential to create some panic selling so keep
an eye on the VIX if it begins to spike.
In the last couple of weeks we have also seen large morning gaps bring
in the bulls to defend the morning low creating a significant rally. Of course to this point those rallies have
not proved to hold but has it has made this market downtrend particularly
challenging for traders. Day traders
have the upper hand in the current market as the daily reversal gaps make it
nearly impossible for swing traders to have an edge.
