Whipsaws and head fakes
All bulls have remained in charge holding key support, but those pesky bears have certainly made this week challenging with all the whipsaws and head fakes they have used to muck up the works. I would not expect the bears to give up easily, but the announcement that the US and China will come back to the trade negotiation table may finally inspire the bulls to break for higher ground. Although still, a very dangerous storm with the east coast hurricane downgraded to a category-2 may also help to lift the mood of the market.
Leaving behind some questionable candle patterns in the indexes yesterday we are not out of the woods just yet and have to remain watchful of those nasty intraday whipsaws and head fakes. However, the path higher seems to have fewer obstacles to overcome at the moment. Stay focused and price and always be prepared with a plan to deal with whatever the market tosses at us.
On the Calendar
The potential market-moving CPI report and the weekly Jobless Claims kick off the Economic Calendar at 8:30 AM Eastern. Forecasters expect the CPI to rise 0.3% in August with the overall year-on-year core at 2.3 percent. Consensus expects 210,000 in initial claims coming off a 50-year low as labor demand remains very high. We have a Fed Speaker @ 10:00 AM, Natural Gas report at 10:30, three Bond Announcements @ 11:00 AM, another Fed Speaker at 12:30 PM, a 30-Yr. Bond Auction at 1:00 PM, the Treasury Budget at 2:00 PM, Fed Balance Sheet and Money Supply at 4:30 PM to wrap up the day.
On the Earnings Calendar, we have 33 companies fessing up to their quarterly results. Before the bell, KR is among those reporting, and ADBE is the most notable after the market close today.
Action Plan
With all the gaps and whipsaws and choppy consolidations, this has been a rather challenging week. On the positive side, the indexes have held on key supports but so far have not found the energy to follow-through to the upside. Yesterday it was announced that the US and China could begin another round of trade negotiations. As a result, Asian markets closed higher across the board with the European markets are mixed but mostly higher. Consequently, US Futures are suggesting a bullish open as I write this.
The market continues to prone to intraday whipsaws but perhaps with China tariffs temporarily set aside and the east coast hurricane down to a category-2 storm the bulls can produce a more deliberate effort. While the bears have not shown a lot of strength, they sure have been disruptive, and they will likely not give up easily. We still need to be watchful of head fakes, and whipsaws so stay focused on price and prepared for anything.
Trade Wisely,
Doug
Bulls Stepped Up
After the nasty gap down open yesterday, the bulls stepped up to defend key support levels producing nice bullish engulfing signals on the DIA, SPY, and QQQ. I honestly was hoping to see a very strong bullish follow-through this morning, but so far the Futures are pointing to muted open. With a dangerous hurricane bearing down on the east coast and the continued threat of new tariffs a somewhat muted open is not all that surprising.
Bullish engulfing candles are great signals but remember they require a bullish follow-through to be valid. If the bulls are unable to follow-through, the bears could see that as a sign of weakness and attack. So come on bulls we need you to dig in and push hard! It’s very easy to see great bullish signals and become overly biased and over committed to long positions before price confirms direction. Stay focused on price action and be careful not to load up too heavily long until we see some follow-through.
On the Calendar
We kick off the Wednesday Economic Calendar at 7:00 AM Eastern with the MBA Mortage Applications. At 8:30 the PPI according to consensus is looking for a 0.2 percent increase in August, and when excluding food, energy and trade services a 0.2 percent gains is also expected. The Atlanta Fed Business Inflation Expectations is at 10:00 AM. Then the EIA Petroleum Status Report comes out at 10:30 AM and although a market-moving report it’s not forecast forward with a consensus estimate. We have a Fed Speaker at 12.45 PM and a Bond Auction at 1:00 PM. Last but not least is the Beige Book release which is used by the FOMC to set monetary policy. The next FOMC meeting announce is in 2-weeks on 9/26.
On the Earnings Calendar today we have just nine companies reporting. There are no particularly notable reports before the bell, but after the close TLRD, PVTL & OXM are the most noteworthy.
Action Plan
Another day another nasty whipsaw but this one finished the day on a very positive note. The DIA and SPY supports were not only defended, but Bulls rallied with enough energy to leave behind bullish engulfing candles. The QQQ also produced a bullish engulfing candle rallying back to an important resistance level while the IWM held support but largely rested. Asian market closed down across the board last night, and the current European markets are mixed but mostly positive.
Bullish engulfing candles are great but still require bullish follow-through price action to confirm the signal. As I write this, the US Futures are suggesting only a modestly higher open this morning. I must admit I was hoping for a bit more bullishness this morning following such a nice reaction to support levels yesterday. However, with a powerful hurricane bearing down on the east coast and the lingering threats of new tariffs it’s not all that surprising to see a slightly muted response. The good news, at least for now, is that it’s bullish but be careful not to chase and stay focused on price action.
Trade Wisely,
Doug
Pop and Drop
After gaping up nearly 90 points yesterday, the Dow found the only sellers and delivering the classic pop and drop whipsaw. Leaving behind a bearish engulfing candle on the DIA suggest a lower print today but the fact the index continues to hold about a key support continues to give the Bulls a slight edge. On the other hand, the NASDAQ appears to be the most vulnerable as it lingers below a key resistance level.
Yesterday I cautioned about chasing a gap caught up with the fear-of-missing-out. The same caution holds true today. It is just as wrong to chase a gap down as it is to chase a gap up. Fool me once shame on you, fool me twice shame on me! Emotional undisciplined trading is the pitfall for the majority of retail traders. Don’t play that game and watch your account continue to be chopped up. Today after the gap down wait and watch for follow-through because there is just as much chance of whipsaw up near support as there was for the pop and drop yesterday.
On the Calendar
Today’s Economic Calendar kicks off early today, but there is only one potential market-moving report. We begin with the NFIB Small Business Optimism Index @ 6:00 AM then the Redbook at 8:55 AM. The JOLTS report at 10:00 AM expects job openings to increase slightly to 6.670 million in July vs. 6.662 million in June continuing the trend of strong demand for labor. Wholesale Trade is also @ 10:00 AM and we have three Bond Auctions between 11:30 AM and 1:00 PM to finish the Calendar day.
On the Earnings Calendar today we have just ten companies reporting results, and none of them are particularly noteworthy. Make sure to keep checking because being surprised by an earnings report can prove to be a costly mistake!
Action Plan
Yesterday I cautioned about chase the morning gap and getting caught up with the fear of missing out. The DIA found only sellers after gapping up nearly 90 points with the classic pop and drop whipsaw leaving behind a bearish engulfing candle. The SPY and IWM faired better closing down on the day but continued to hold above Friday’s low prints while the QQQ stalled below resistance. Currently, the Dow Futures are suggesting a gap down of equal magnitude of yesterdays gap up.
The good news is that the DIA, SPY, and IWM remain above key supports that could be defended by the bulls. The QQQ’s appear to be the most vulnerable to a bear attack currently under price resistance. If selling pressure continues after the market, open clues to future selling might manifest in the QQQ’s first. Remember the Bulls will not likely give up easily so watch for a potential whipsaw back up at or near support levels. It is just as wrong to get caught up, chasing a gap down as it is to chase a gap up.
Trade Wisley,
Doug
No Fear
Even in the face of 276 billion in possible China tariffs, the Bulls are showing no fear this morning with the Futures suggesting a substantial gap up at the open. The DIA, SPY, and IWM having held key levels of price support last week look ready to for another leg higher. The QQQ’s still has some work to do to reclaim a key support but the current bullish would suggest that is certainly possible.
Although the market is putting on a brave face this morning, keep in mind that the bullish sentiment could quickly shift if the tariffs become a reality. If the market doesn’t care then why wouldn’t the president move forward with them? Plan your risk accordingly. Keep in mind whipsaw price action is possible near market highs so be careful not to chase with the fear of missing out. Remember low-risk entries occur at or near price support not at or near price resistance.
On the Calendar
We begin this week with an Economic Calendar without an expected market-moving report the entire day. We have a Bond Announcement @ 11:00 AM, a Fed Speaker @ 11:30 AM, 2-Bond Auctions @ 11:30 AM, TD Ameritrade IMX @ 12:30 and Consumer Credit @ 3:00 PM to close the day.
Of the 24 companies reporting on the Earnings Calendar this Monday, I don’t see anything particularly notable or market-moving. However, it’s still extremely important that you are checking reporting dates against your current holdings. Doing so is a simple practice that is important for all traders.
Action Plan
It would appear that the threat of new tariffs is not enough to deter the Bulls from pushing the market higher. Asian markets were mixed but mostly lower overnight however European markets are currently showing modest gains across the board this morning. There is still a significant amount of time before the open, but currently, the Dow Futures are suggesting a gap up of nearly 100 points.
Friday’s sudden attack lower was defended by Bulls holding key support levels in the DIA, SPY, and IWM. The QQQ remained below an important resistance level but this mornings bullishness looks as if regaining this level as support is possible. All-in-all the bullishness this morning looks good for a new leg higher in the market. Remember too we watchful of whipsaws at or near market highs. Also, remember the Fear-Of-Missing-Out is a powerful emotion so be careful not to over-trade or chase gapping stocks near resistance. Ignoring the possible tariff now could still create a quick change in market sentiment if levied, so plan according.
Trade Wisely,
Doug
Focused and Flexible
As we head into the weekend with a strong Employment Situation report expected and the looming threat of 200 billion in tariffs, traders will need to stay very focused and flexible. The DIA, SPY, and IWM are all holding just above key support levels. Unfortunately, the QQQ’s failed its key support yesterday, but that can recover quickly if the bulls find something to inspire them. However, if the bears happen to find inspiration to attack we could see some nasty price action should support fail in the other indexes.
Stay focused on price action watching for head fakes and whipsaws. I also think it’s important to set aside your bias and remain flexible and prepared. The market is at a critical decision point, and though I’m cheering for the bulls, it’s unwise to underestimate the bears. Carefully plan the risk you carry into the weekend.
On the Calendar
The Friday Economic Calendar has only one market-moving report today, but they don’t get much more important than the 8:30 AM Eastern Employment Situation report. The consensus is expecting a strong August with job creation rising to 195,000 and the unemployment rate falling to 3.8 percent. Monthly hourly earnings are also expected to increase by 0.3 percent with the year-on-year rate rising to 2.8 percent. Manufacturing is expected to show a very solid increase of 21,000 and private payrolls rising 190,000. We have Fed speakers at 8:30, 9:00 & 10:45 AM with the Quarterly Services Survey @ 10:00 AM, the Baker-Hughes Rig Count @ 1:00 PM and Treasury STRIPS closing out the week at 3:00 PM.
On the Earnings Calendar, we have a light day with only 13 companies reporting. Before the bell, HURC & GCO are among those reporting with MSB and UBA among those reporting after the close.
Action Plan
Yesterday was an interesting day with 3 of the indexes turning lower while the bulls focused their attention on the Dow. While there were several bear attacks in the Dow creating interday whipsaws, the Bulls found a way to push right back. Overnight Asian markets were mixed but mostly lower and European markets are currently lower across the board. Consequently, current US Futures are pointing to a lower open but with a strong Employment Situation report expected an hour before the open that could quickly change the open expectation.
The QQQ’s failed at support yesterday, but the DIA, SPY, and IWM managed to hold just above key levels. With the Employment Situation report and the threat of 200 billion in new tariffs leveled against China, we will have to flexible and focused. As normal I will be looking to take some profits and reduce risk heading into the weekend.
Trade Wisely,
Doug
Bulls Held Tough
The Bulls held tough at trend and support yesterday even in the face of some nasty tech selling. Now we need to see the Bulls muster the energy to follow-through and rally off of support. With a very busy Economic Calendar today and several big earnings reports perhaps they can find the catalyst necessary to do so. If the Bulls are unable to push higher, then keep a close eye on selling pressure in the tech sector. We don’t want to see that pressure boil over in more selling that breaks support.
Be careful on the over-trade keeping in mind the possible 200 billion in tariffs threat that could happen this week and the big Employment Situation report on Friday which has in the past created light and choppy price action as the market waits.
On the Calendar
A busy day on the Thursday Economic Calendar begins at 8:15 AM with the ADP Employment Report. ADP’s estimate in August is 182,000 but, this number has been quite inaccurate month over month. The weekly Jobless Claims at 8:30 AM expect 213,000 up just slightly from last week when claims hit a 50-year low. Also at 8:30 AM is Productivity and Cost which estimates nonfarm productivity is increasing to 3.0 and labor costs down 1.0 percent.
Factory orders & ISM Non-Mfg Index are both come out at 10:00 AM. Factory Orders are expect a decline of 0.7 percent due to a sharp aircraft-related decline while the ISM consensus in August is for a slight increase to 56.7 vs. 55.7 in July. EIA Natural Gas Report is at 10:30 with the EIA Petroleum Status Report coming at 11:00 both of which do not forecast forward. Finally the Fed Balance Sheet at 4:30 PM which is scheduled to reduce securities holdings. We have a Fed Speaker at 10:00 AM, 6-Bond Announcements at 11:00 AM and the Money Supply report at 4:30 PM to wrap up this very full calendar day.
The Earnings Calendar also has its biggest day of the week with nearly 50 companies reporting. Look for BKS, GIII, and NAV to report before the bell with ABM, AVGO, FIVE, FNSR, GME, MRVL, OKTA, and PANW to report after the close.
Action Plan
Futures are pointing to a modestly higher open this morning in the Dow, but the SP-500 and NASDAQ are flat to slightly lower. Asian markets were down across the board overnight with the European markets currently holding mixed results. There is a lot of economic news today and keep in mind the big Employment Situation report comes out Friday morning. Light and choppy price action can sometimes occur as the market waist for that government employment number so don’t be surprised if price action happens to be a little subdued.
The bulls has did a great job of holding trends and support levels yesterday. If they can muster the energy to follow-through to the upside today that could prove to be very bullish for the market and an opportunity for buyers. If they are unable to push upward the selling pressure seen in the techs yesterday could trigger some additional selling. Remember the possibility of the new China tariffs still weighs on the mind of the market as well. Price is King so stay focused on price action and know that head fakes and whipsaws continue to be a possibility as we test support levels.
Trade Wisely,
Doug
Indecisive Price Action
Looking over yesterdays price action, I see indecisive candle patterns with bulls working very hard to defend against intermittent bear attacks. The index trends are still clearly intact and bullish, but the cloud of a potential 200 billion in new tariffs continues to embolden the bears to test bullish defenses. Thus far the bulls are still in control and holding above key support levels.
Unfortunately, the bulls are also having to fight against declines in Asia and Europe overnight, so futures are pointing to negative open to test the resiliency of the bulls. Thus far the VIX has remained in check, so this could prove to be nothing more than a light volume pullback and a good setup for the indexes to move higher. On the other hand, the tariff threat could green light a bear attack that breaks through support levels. Watch price action closely and be careful not to anticipate and allowing your bias to cloud your view. Whipsaw and quick price action are possible as we approach important support levels.
On the Calendar
We have an interesting Economic Calendar this Wednesday with a Fed presence as I’ve never seen before on a single day. First, we have a potential market-moving report from International Trade @ 8:30 AM which consensus suggests will show a widening deficit to 50.2 billing vs. the 46.3 billing reading in June. We have the Mortgage Application report at 7:00 AM and the Redbook at 8:55 but both are unlikely to move the market. 9:20 AM kicks off a parade of Fed speakers beginning with James Bullard, John Williams @ 12:30 PM, John Williams again @ 3:00 PM, Neal Kashkari @ 4:00 PM, John Willams for the 3rd time at 5:30 PM, with Raphael Bostic finishing up @ 6:30 PM.
On the Earnings Calendar, we have just over 30 companies reporting. Among those reporting, today are HDS, CLDR, CTRP, CWK, DOCU, GWRE, MDB, OLLI, and ZS. Make sure you are continuing to check reporting date against current holdings or before entering new positions.
Action Plan
Yesterday saw another intra-day bear attack with a very quick selloff in the morning followed by a slow grind higher as the bulls worked to defend supports. Although the rally was nice to see, it left behind more questions than answers with indecisive candle patterns. While we slept Asian markets closed lower across the board with the European market following the trend also currently showing losses across the board.
US Futures are currently suggesting a negative start to today’s trading, but they have currently rallied off the lows cutting the potential gap down by nearly half at this point. Yesterday I suggested using some caution and being careful not to overtrade because of the current price action in the indexes is indecisive. With market around the world showing pullback it would not be a big surprise if the bears attempt to test the overnight lows. The bulls, however, will not give up control easily so we should also watch for price action clues or bullish strength as we approach important levels of support. Quick price action and whipsaws are likely as the bears continue to test the bullish defenses.
Trade Wisely,
Doug
Challenging Clues
A new record high in Russell and indecisiveness in the DIA and SPY certainly makes for challenging clues as to what happens next. On the positive side, all the indexes are trending, and the bulls have shown tremendous strength with the hope of wrapping up trade negotiations with Mexico and Canada. On the negative side, the threat of 200 billion in new tariffs against China looms heavy, and the bears have started looking for weakness with some minor attacks.
Couple that with the possibility of light volume due to extended labor day vacations and the phrase, “anything is possible,” seems to be an understatement. The futures are pointing to a lower open, but I wouldn’t expect the bulls to give up easily. Remember a pullback to test support within a trending market is a normal and healthy thing as long as support levels hold.
On the Calendar
Our short week begins with three potential market-moving reports on the Economic Calendar. First, at 9:45 AM the PMI Manufacturing Index according to consensus will see a slightly decline to 54.5 in August vs. 55.5 in July. At 10:00 AM, the ISM Mfg. Index is also expected to decline slightly to 57.6 vs. 58.1 giving some relief to backlogs and delivery delays. Also at 10:00 AM, the volatile Construction Spending is expected to increase in July by 0.4% while continuing to experience labor shortages and higher material costs. Other than that we have 3-Bond Auctions between 11:30 AM and 1:00 PM to round out the day.
On the Earnings Calendar, we have just over 30 companies reporting results today. Before the bell, CONN, CASY and SHLD are among those reporting. After the close COUP, WDAY, and RH are among those stepping up to report.
Action Plan
Friday’s choppy price action shook off the morning selling with a late day rally producing a new record high close for the Russell. The QQQ stop just short of making a new record while the DIA and SPY left behind candles of indecision. Asian market was mostly higher overnight although the Chinese economy continues to produce worrisome data points. Currently, European markets are decidedly lower this morning as the threat of 200 billion in new US tariffs looms over China.
The Bulls have been solidly in control, but this morning the Futures markets are indicating a gap down open. After such a strong run a pullback or consolidation would be healthy as long as the bulls defend support levels. However, the bulls have been so tenacious that a rally back would not be out of the question. Remember that many traders may have extended their holiday into this week so choppy price action and light volumes are possible.
Trade Wisely,
Doug
Traders Lifestyle
There are good days trade, and there are days when it’s better take the day off and enjoy the privileges of a Traders Lifestyle. Facing a 3-day weekend with the possibility of 200 billion of new tariffs levied against China new week hanging over the markets head, today might be just such a day!
I have personally taken profits and trimmed my holdings all week to reduce risk heading into the long weekend. I hope many of you have done the same, and honestly, I hope many of you are not even around to read this morning note because you have already taken off for the weekend. If you are still here, keep in mind volumes could become very light and choppy after the morning rush. If a trade deal with Canada come to fruition, we will likely see a flurry of activity but keep in mind profit-taking, and risk reduction will be on the mind of a good many traders today. Plan your risk carefully and enjoy the last official days of summer this Labor day weekend!
On the Calendar
The last day of August Economic Calendar gets going with Chicago PMI at 9:45 AM Eastern. Forecasters suggest a slight pullback from a very high level to 63.8 vs. the 65.5 reading in July on PMI. Then at 10:00 AM Consumer Sentiment according to consensus will slightly increase to 95.5 in August. There are 6-bond settlements today and the Baker-Hughes Rig Count @ 1:00 PM to close out the August calendar.
Today the Earnings Calendar is very light showing only five companies reporting results. They are BFRA, CANF, RENN, RUBY & BIG to finish up the August earnings.
Action Plan
Asian and European markets seemed to follow the US turn lower yesterday with across the board losses in their major indexes. Surprisingly US Futures are not suggesting a substantial gap down but instead indicate just modest decline at the open. The Bulls have certainly been tenacious this week, and perhaps they have still have the energy to close this last trading day in August on a high note. Or maybe they are holding out and hoping the trade agreement with Canada will get announced sometime before it Friday deadline expires.
Unfortunately, as we slide into a 3-day weekend and a 200 billion tariff threat against China next week could also have the bears on a prowl. Remember this is the get-a-way day, and a lot of traders will abandon their computers in favor of celebrating Labor Day and the lasts official days of summer. Volume could be light and very choppy after the morning rush. Plan your risk carefully as anything is possible over the long weekend. Have a wonderful weekend everyone!
Trade Wisely,
Doug
Tenacious Bulls
Tenacious Bulls gathered energy at the rest stop on Wednesday to once again set new records in the SPY, QQQ, IWM yesterday. What goes up must eventually come down, but with the possibility of a trade agreement between the US and Canada by Friday, I think it would be unwise to anticipate short positions.
However, with a 3-day weekend just around the corner and the likelihood that many traders will extend the holiday by taking off Friday and/or Tuesday don’t be surprised to see some choppy light price action. Also with the risk of market-moving news over a 3-day weekend don’t be surprised to see some profit-taking before the end of the week.
On the Calendar
Weekly Jobless claims kick off the Economic Calendar at 8:30 AM Eastern. Consensus expects claims to come in at 214,000 showing continued strong demand for labor. Also at 8:30 AM Personal Income and Outlays which expect incomes to rise 3.0 percent with consumer spending up 0.4 percent. The overall PCE is looking at a year-on-year rate of 2.3 percent which is an increase of 2 percent. At 10:30 we get the latest reading on US Natural Gas supplies, however, there is no consensus forecast. Then at 4:30 PM the Fed Balance Sheet. We also have three Bill Announcements at 11:00 AM and the Money Supply report at 4:40 PM.
On the earnings calendar, there are over 50 companies reporting today. Among those reporting before the bell, DG, DTLR, SHLD, and SIG. After the close AMBA, LULU, ULTA, and COO are among those reporting results.
Action Plan
More record closing highs in the SPY, QQQ, and IWM as the took advantage of Wednesday’s rest stop to gather energy. Unfortunately, Asian markets closed mostly lower overnight, and European are currently slightly lower across the board. US Futures are pointing to a lower open with the Dow currently suggesting a gap down of more than 50 points.
With the Labor Day 3-day weekend just around the corner, a little profit-taking after this strong bullish run would not be all that surprising. However, the Bulls have shown remarkable tenacity this week, and with the possibility of a Canadian/US trade deal by Friday, I wouldn’t want to anticipate a selloff by picking up some short positions just yet. I have been scaling out of trades and taking profits since Tuesday of this week and will likely continue to so lowering my risk as we head into the long weekend.
Trade Wisely,
Doug
All bulls have remained in charge holding key support, but those pesky bears have certainly made this week challenging with all the whipsaws and head fakes they have used to muck up the works. I would not expect the bears to give up easily, but the announcement that the US and China will come back to the trade negotiation table may finally inspire the bulls to break for higher ground. Although still, a very dangerous storm with the east coast hurricane downgraded to a category-2 may also help to lift the mood of the market.
