Less Aggressive FOMC
Did anyone notice a sparkle in Jerome Powell’s eye and check for reindeer on the roof as he delivered the huge gift of a less aggressive FOMC? Moments, after he began to speak the gates opened and the bulls unleashed a huge wave of buying that quickly cut through pesky price resistance levels. Currently, the US Futures are pointing to a modest gap down open this morning, but a little profit-taking after such a huge one-day bull run should not be a big surprise.
Keep a close eye on the price action because the sheer momentum of yesterday’s move could inspire the bulls to continue pushing forward into the weekend. Now the market will focus it’s attention on the G20 meeting and hoping it will help deliver the bigger gift; progress on the US / China trade negotiations. With the harsh rhetoric and threats lobed back an forth between the two leaders that might be a big ask. Stay focused on price action the clues will be there.
On the Calendar
On the Earnings Calendar, we have our biggest day of the week with 54 companies expected the report to keep us on our toes.
Action Plan
The Fed Chairman Jerome Powell triggered a bullish stampede yesterday indicating a less aggressive
FOMC than the market had expected. The burst of buying cut through resistance levels in the indexes as if a pressure value suddenly opened. After such a huge move its not unreasonable to think there will be some profit taking and according to this morning’s futures we should see a modest gap down.
If we could now get a trade agreement between the US and China, Santa’s could come to town in a newly turbocharged sleigh! Unfortunately, it’s not all sunshine and roses this morning with the news of a police raid on Deutsche Bank with allegations of money laundering. After the morning pullback, keep a close eye on the price action, yesterday’s huge momentum could keep the Bulls pushing forward into the end of the week.
Trade Wisely,
Doug
Relief Rally?
Although volume remained light a relief rally is still a welcome site! The bulls found the energy to not only defend the support of yesterdays gap down but also push the Dow into the November 20th gap. A good start but let’s keep in mind that with so much technical damage and the threat of increasing tariffs just around the corner the price action is likely to remain very challenging. The QQQ is only a couple days away from joining the IWM with a death cross, and the DIA still has the 200-day average as resistance.
Of course, a trade deal with China would be a game changer but now seem less and less likely as the rhetoric continues to fly between the two countries. Asian markets closed sharply higher overnight, and European markets are currently mostly higher as well. As a result, the US futures are pointing a gap up open of more than 100 points this morning. As nice as it is to see the bulls running, please remember to respect the overhead resistance. Chasing into the market on a gap up near price resistance levels is a dangerous business. It would be wise to wait and see if buyers step in to support the gap or if profit takers take the gift provided by the gap.
On the Calendar
On the Earnings Calendar, we have just under 40 companies expected report so please continue to check new and existing positions as part of your daily preparation.
Action Plan
After a concerning gap down yesterday the bulls hung in there defending support moving the indexes higher even though volume remained quite low. The big gap down created on 11/20/18 now has a good chance of being filled and challenging the nest level of resistance. Unfortunately, the QQQ is only a couple days away from joining the IWM with a death cross. We should expect challenging price action and volatility to continue.
Even with the current relief rally, we must keep in mind that the overall markets are still in a downtrend. That means we have to be on the lookout for possible failures as we approach resistance levels. This morning the futures are pointing to a gap up open, and we all know that brings with it the possibility of the dreaded pop and drop pattern. If you’re already long, remember that gaps are gifts and consider taking some profits. However, if you’re looking to enter a new position, make sure there is follow-through buying supporting the gap.
Trade Wisely,
Doug
Follow-Through?
After the big gap and rally yesterday I was hoping for a little follow-through today, but a little profit taking would not be that unusual. So far this morning presidential trade war threats have trumped the record-breaking Cyber Monday sales event. (pun intended) As a result, AAPL is under a little pressure this morning as the hits keep on coming for the battered tech sector.
If the Bulls can defend yesterday’s low in the QQQ’s, then the strong holiday sales should extend the relief rally. However, if the Bears are allowed to breach yesterday’s index lows fear could easily win the day, and a retest of last Tuesdays low would not be out of the question. Volume should return of the next few days so be patient, disciplined and focused on price action. We all want to see the market recover but what we want is not important. See the chart for what it is not as we want it to be!
On the Calendar
On the Earnings Calendar, we have 33 companies reporting result today.
Action Plan
The online shoppers worked hard all day yesterday increasing yesterdays Cyber Monday sales by nearly 20% over last year and setting new records. Now that the Thanksgiving shopping events are over and vacations ending volume should begin to return over the next couple of days. Unfortunately, futures are pointing to modest gap down this morning with the president threatening tariffs on all imported iPhone’s from China. Consequently, AAPL is under a little pressure this morning putting even more pressure on the already vulnerable tech sector.
After such a big rally yesterday some profit taking would be normal but if the sellers breach yesterday’s low a retest of last Tuesday’s could be possible. However, if the bulls can defend yesterday’s low’s then a move higher to test resistance seems likely assuming trade war rhetoric doesn’t get in the way. Be patient, flexible and focused on price action without bias, remembering there is no need to rush to a trade. The volume will return, but I would not be at all surprised if it does so slowly over the next few days.
Trade Wisely,
Doug
Record-Breaking Holiday
It would seem the record-breaking holiday spending is bringing out a wave of bulls this morning squeezing the bears that held short positions over the weekend. The Dow is currently expected to gap up nearly 250 points. As nice as is to see some relief in the selling be careful not to get caught up in the morning hype chasing into the gap. First, consider that volume has the potential of being light today as many traders extend vacations and that the Cyber Monday sales event will attract a lot of attention away from the market.
Secondly, keep in mind that one day does not make a trend and that all the index charts have significant price resistance levels above. While it’s true, this could be the beginning of a Santa Claus rally it could also be nothing more than a pop and drop unless we see real buyers stepping in to support the gap after the open. If you happen to be in long positions, then remember that gaps are gifts, consider taking some profits. If, like me, your mostly flat this morning then we have already missed the move which means there is no need to rush. Maintain, your discipline, don’t chase and wait for the next entry that provides you an edge.
On the Calendar
We have 42 companies on the Earnings Calendar expected to report results this Cyber Monday to keep us on our toes.
Action Plan
The bulls seem very inspired today as holiday shopping blows past all previous records and its far from over. The estimates for today’s so-called Cyber Money sales event is expected break records as well with more than 7 billion in online sales with the vast majority coming from mobile devices. It would seem shopping from the phone has now become the preferred method of holiday shoppers.
As I write this the Dow futures are pointing to a gap up of more than 250 points. Anyone caught short will most certainly experience the pain of a short squeeze this morning. With the nasty winter storm that swept across the central US, travelers found themselves trapped at the airport as 1000’s of flights canceled. Combine extended vacations, travel issues and Cyber Monday I would be very careful about chasing into this mornings pop until we see buyers stepping up to support the gap. It’s entirely possible that volume could be light today after the morning rush so keep a very close eye and price action. As nice as it is to see a relief rally keep in mind the indexes have significant resistance levels above which means a pop and drop day is not out of the realm of possibility.
Trade Wisely,
Doug
Black Friday
If the news reports are correct, holiday shopping in-store and online as consumers displayed their economic confidence and ravenous desire to grab a Black Friday bargain. Unfortunately, that has not translated into bullish price action the US Futures. Instead, the market is reacting bearishly this morning with news reports suggesting the US/China trade war could extend well past the end of this year.
Currently, the Dow is pointing to a gap down of nearly 150 points testing Tuesdays low after the morning rush don’t be surprised to see very light and choppy price action as traders extend their holiday vacations and join the Black Friday shopping masses. My plan for the day is to monitor current positions only and avoid adding risk into the weekend.
On the Calendar
We have only 9-companies reporting earnings on this partial day of trading. That number will jump up between the 40’s the and 50’s next week as some of the last 4th quarter reports continue to trickle in.
Action Plan
New concerns that the China trade war could extend through the 2020 presidential election has the US Futures turning south this morning. According to news reports Thanksgiving in-store and online sales may have hit new record highs yesterday as confident consumers shopped a good deal of the holiday. Best Buy has reported Thursday transactions numbers were higher than ever. With the Black Friday shoppers already filling the stores this morning it looks like Santa is doing his part at least in the retail space.
My plan today is to monitor current positions and avoid the temptation of adding new risk ahead the weekend. Volume will likely be extremely light and price action choppy which makes the risk greater than the potential reward in my opinion. As a result, I intend to extend my holiday as will most other traders. If you do decide to trade today, I would suggest keeping in it small and remember that Cyber Monday often is a very last luster day as well so plan your risk accordingly.
Trade Wisely,
Doug
Negative Territory
Another nasty day of selling in the tech sector, breaking below Octobers low, and lead the overall market into negative territory for the year. On the positive side the DIA, SPY, and IWM managed to hold at the support of Octobers low, but there is so much technical damage in the charts its difficult to call that victory. Both the QQQ and the SPY are at risk of joining the IWM with their 50-day averages crossing below the 200-day averages in the very near future. The so-called death cross.
Yesterday before the market had even closed there were traders predicting this is the bottom. Really? Yes, this could be a bottom, and this morning we are getting a nice oversold bounce but consider the fact it may be just a resting point before resuming the downtrend. See the price action for what it is not for what you want it to be! Gamble and you may win, but you have an equal chance of just providing liquidity. Remember volume is likely to decline sharply after the morning rush so plans your risk into the holiday carefully! I wish you all the very best and Happy Thanksgiving.
On the Calendar
On the Earnings Calendar, we have less than 40 companies reporting earnings as we head into the holiday. Notable reports today are ADSK, BILI, BJ, BZUN, CPRT, DE, FL, GPS, KEYS, SE.
Action Plan
After yesterdays nasty gap down and selloff, the indices are once again in negative territory for the year. Now the question is will the October lows hold as the price support for the DIA, SPY, and IWM? The QQQ’s yesterday broke support creating yet another layer of resistance as the tech sector continues to slide lower. This morning futures are suggesting a bounce this morning, and I’m already seeing traders trying to predict that this is the bottom.
After sliding 1000 points in just two days, it might be wise to consider that this mornings rally is merely a short-term oversold rally! Sure you could gamble and win but its still a straight up gamble nothing more! We have a very busy economic calendar this morning and some important earnings reports, but after the morning rush volume is likely to drop quickly as traders head out for their holiday plans. I want to wish every one of you a very Happy Thanksgiving!
Trade Wisely,
Doug
QQQ
Yesterday as I evaluated the index charts I mentioned my biggest concern was the vulnerability of the QQQ chart and its ability to drag the market lower. Unfortunately, with the WSJ reporting fresh concerns about FB leadership and AAPL cutting production of its new iPhone’s, the QQQ’s broke support as the tech index tumbled 3.25%.
Asian markets follow the US lower overnight, and European markets are lower across the board this morning. As a result, US Futures indicate a substantial gap down with the QQQ set to test Octobers low at the open. As the holiday approaches volumes are very likely to decline after Wednesday’s open so plan your risk carefully and remember cash is a position!
On the Calendar
On the Earnings Calendar, we nearly 60 companies reporting earnings today. Notables include A, ADI, BBY, BECN, CPB, HRL, INTU, JEC, KSS, LB, LOW, MDT, NUAN, PSTG, ROST, SFL, TGT, TJX, URBN.
Action Plan
My concern about the QQQ chart became a reality yesterday with new that AAPL has slashed production of its new iPhone’s and more concerns about FB leadership surfaced. The NASDAQ broke support sliding 3.25% dragging the rest of the market lower as it declined. Now a test of the October low and possibly lower seems inevitable for the QQQ. Currently, the US Futures indicate sharp declines at the open as the technical damage in the charts continues to grow.
Historically the influence of Santa should begin, but those eight little reindeer have to battle a tremendous headwind this year. Asian markets were sharply lower overnight, and currently European are down across the board. As bearish as all that sounds be careful not to chase short positions near support with a gap down open. Wait to make sure there are follow-through sellers supporting the gap. At this time the VIX is indicating fear, but if the market breaks to new lows, we will have to watch for signs of panic selling. Keep in mind volume will likely decrease substantially on Wednesday so plan your risk carefully as we head into the holiday.
Trade Wisely,
Doug
Choppy Holiday Price Action
Thanksgiving vacations, Black Friday and Cyber Monday typically set the stage for choppy holiday price action. There are a lot of good-looking charts showing up after the rally relief last Thursday and Friday, but as the holiday nears they may find it difficult to find the energy follow-through. Of course, news such as a China trade deal would be a game changer but short of something like that this could be a challenging week.
You may have to very flexible and nimble willing to taking profits and cutting losers quickly. After the morning rush on Wednesday expect volume to drop like a rock unless driven by a surprise new event. Expect choppy price action on the half day of Black Friday trading and the Cyber Monday holiday sales events. If you’re heading out early for your holiday plans, I want to wish you safe travel and a very Happy Thanksgiving!
On the Calendar
There are 66 companies reporting earnings today. Notables today are AABA and JD which both report before the bell this morning.
Action Plan
Major holidays weeks typically see a significant decline in volume adding an additional challenge to our trading. We may find plenty of good long and short entry signals, but they may lack the energy to follow-through and profit. Thursday the market is closed, and Friday it’s only open half a day. In the past, both Black Friday and Cyber Monday are also light volume days with everyone focuses on the holiday shopping deals and travel.
Futures are suggesting a slightly bearish open with the Dow currently indicated to gap down about 75 points. Asian and European markets were bullish overnight. Because of the risks of holding over a holiday weekend, if I do trade, I will plan to take profits quickly and cut losers without mercy. I intend to be light in my portfolio on swing trades by Wednesday and will most likely stay that way until next week. If the holiday sales events go well then perhaps Santa can begin working his magic by next week. If sales disappoint, then watch the emergence of the Grinch.
Trade Wisely,
Doug
Nice bounce, but?
I don’t know about you, but I certainly wanted to see a little bullish follow-through after yesterdays nice bounce. Unfortunately, the current futures market is proving once again that what I want has nothing to do with what the market does! Sadly a lesson that took me a long time to learn.
With volatility so high anything is possible. If the market provides us with a quick profit, we should consider taking some or all of it off the table during turbulent market conditions. It may not be what you were planning for hoping for but it far better to take small gains consistently than letting those gains diminish or disappear overnight. As we head into the weekend, consider your risk carefully and remember that Thanksgiving is just around the corner which means volume will likely decline sharply heading into the holiday.
On the Calendar
On the Earnings Calendar, there are only 16 companies reporting as the 4th quarter season winds down.
Action Plan
After the nice bounce yesterday, I’m guessing that everyone was hoping for a follow-through push higher this morning. I know that’s what I wanted to see! However, what we want has nothing to do with what the market gives us. The unfortunate truth is that currently, the Dow Futures look to take back some of the reality with a gap down of more than 100 points. Disappointing yes, but not all that surprising given the recent market volatility.
As we head into the weekend, consider your risk carefully with high market volatility in mind. If you have current profits, it may be wise to take some if not all the gains and tuck that safely away in your account over the weekend. As 4th quarter earnings wind down, expect the market to become even more sensitive to any reports China trade and the likelihood of an agreement. Also, as Thanksgiving approaches, keep mind that volume can quickly dry up as traders take time off for the holiday, adding to the already challenging price action. Have a great weekend everyone!
Trade Wisely,
Doug
Is the Sky Falling?
Listening to the market reports it would be easy to conclude that the sky is falling! However, if you study price action, there is nothing that out of ordinary concerning the current pullback. After more than a 2000 point Dow rally in just 9-days, the oddity is not expecting one to occur! For all traders, this selloff is unnerving and very uncomfortable, but as long as price remains above October low, the sky is not falling.
In fact, the vast majority of market bottoms are formed this way. They take time, and they are always volatile and trying to fight it is a good way to go broke. As always it will be the institutions with their trillions of dollars that will decide when it’s over not the retail traders! If your being chopped to pieces in this volatility, stop trading. Study price, watch and wait for your edge to return. Better days are coming and when it does there well great stock at discounted prices.
On the Calendar
On the Earnings Calendar, we have nearly 250 companies reporting results today. The bad news is this could add to market volatility with the good news is we are beginning to wind down earnings this quarter.
Action Plan
Some pretty wild price action yesterday with Dow swing more than 325 points from high to low in a very volatile session. The possible silver lining I mentioned yesterday didn’t show itself but looking at the major index charts is still possible as long as prices hold above October’s low. Having said that Bears are still in control and we must remember that anything is possible. Sadly IWM has now officially printed the so-called death cross with the 50-day crossing below the 200-day average.
Currently, futures have recovered from overnight lows and currently suggesting a flat to every so slightly bullish open. When the market downturn began in early October, I said the technical damage could take weeks if not months to repair. I have also mentioned several times that the V-bottom that had been forming after a 2000 point rally in the Dow was very rare an that has also proved to be true. That was not a prediction; it was merely a study of typical price action after a selloff. If I can do it, believe me, anyone can read price action as long as you set aside bias and remain disciplined.
Trade Wisely,
Doug
