An absolute mess!
The price action this week has been an absolute mess! Intraday whipsaw and daily overnight reversals have added a layer of complexity to an already very challenging market. When markets go through choppy periods like this, it’s common for traders to lose substantial sums of capital. It’s important for every trader remember that you have a choice. You can continue to fight the chop giving up your edge and watching your account shrink, or you can stand aside protecting you’re capital until your edge returns.
Cash is a position, and in this choppy mess, it may be your very best position. Trading is a marathon it’s not a sprint, and you don’t have to prove anything to the market. If your frustrated and losing money then stop fighting because it’s very easy to compound the losses in this kind of chop. Your edge will eventually return, and good price action will resume, but the question is will you have the capital or the confidence to take advantage of it when it does.
On the Calendar
There is no shortage of potential market-moving reports on this Wednesday’s Economic Calendar. At 8:30 AM Retail Sales expect only a 0.1 percent gain in July due to weakness in vehicle sales. Also at 8:30 the Empire State Mfg Survey expect a slight decline to 20.0 in August vs. the 22.6 July reading while the Productivity and Cost report looks for a gain of 2.5 percent. The 9:15 AM Industrial Production report expects a 0.3 percent gain with manufacturing also moving up by 0.3%. Business Inventories an increase of 0.1 percent and the Housing Market Index is expected to remain flat both coming out at 10:00 AM. The unforecast EIA Petroleum Status Report is at 10:30 AM, and we wrap up this busy day with Treasury International Capital at 4:00 PM.
On the Earnings Calendar, we show only 38 companies reporting. Before the bell, we will hear from M, and after the bell, CSCO and NTAP step up to the plate. Stay on your toes even though earnings season has started winding down.
Action Plan
This morning the Futures are pointing another overnight whipsaw that looks to reverse yesterdays move higher. Even though Turkey’s is in the midst of a serious debt crisis with there currency wildly fluctuating, they decided to put tariffs on US cars and booze. I guess misery, really does love company. Currently, the Dow Futures are suggesting a gap down of nearly 150 points at the open.
I have to say August 2018 has thus far become one of the most frustratingly choppy months we have experienced in a long time. The daily gaps and intraday whipsaws this week has only added another layer of frustration and removed any doubt that a swing traders edge has left the building. If you’re finding your capital is getting chopped up, its time to stand aside and stop fighting this messy price action. Remember Cash is a position!
Trade Wisely,
Doug
A Nasty Battle
Yesterday’s price action turned out to be a nasty battle between the Bulls and Bears with whipsawing leadership several times and likely chopping up accounts. At the end of the day, the Bears came out victorious leaving behind bearish candle patterns across all 4-major index charts. Normally that would suggest some follow-through bearishness this morning, but instead, the market seems inclined to serve up another overnight whipsaw.
Asian markets closed mixed and European seem to be following suit, but the US Futures are casting aside Turkish jitters with the US Futures decidedly bullish this morning. News that an agreement between the US and Mexico is easing trade tensions. Is this the energy we need to run for new market highs? Maybe, but remember the lesson given us yesterday; Chasing the open with a fear of missing out can serve up some big losses if the market whipsaws once again. Carefully plan your approach to the market this morning with that in mind.
On the Calendar
The Economic Calendar gets going early this morning the NFIB Small Business Optimism Index at 6:00 AM Eastern. Then at 8:30 AM we get the only potential market-moving report with Import and Export Prices. Forecasters expect import price 0.1 percent higher in July with export prices increasing 0.2 percent in July. We have Redbook @ 8:55 AM, and two Bond Auctions at 11:30 AM to close the calendar day.
On the Earnings Calendar, we have more than 250 companies reporting earnings today with retail reports as a central theme. After today the volume or earnings reports drops substantially as the 3rd quarter earnings start to wind down.
Action Plan
I think it’s fair to say that yesterday’s price action was an absolute mess as uncertainty driven whipsaws ruled the day. Across all 4-indexes daily bearish candles were left behind suggesting a high likelihood of more bearish price action today. Well, not so much! It would appear after an announcement that the US and Mexico have come to terms on a new trade agreement all the Turkish jitters have taken a back seat. Once again Futures began to rally around midnight and have continued to push higher with the Dow currently suggesting a 100 point gap up. If you feel a twinge of pain from whiplash, you’re not alone as the market continues to be very challenging to trade.
Is this the news we needed for the Bulls to launch to all-time highs in the QQQ’s, SPY and IWM? Or perhaps could this be just another whipsaw that continues to chop up accounts. Your guess is as good as mine! Avoid getting caught up in the opening drama and resist the urge to chase the gap. If you rushed in yesterday and punished for doing so, don’t repeat the same mistake today. Fool me once shame on you, fool me twice shame on me. I for one will wait for the morning rush to pass and stay focused on price action watching for clues of follow-through buying before deciding on any new risk.
Trade Wisely,
Doug
Turkish Uncertainty
The market hates uncertainty, and the rapid fluctuations in the Turkish Lira has without question raised some uncertainty. Banks around the world including many US Banks holding Turkish debit will obviously experience some pressure as the Turkish economy struggles. Dow Futures have rallied significantly from overnight lows with the bounce off the Lira. Asian markets closed lower and European markets are also under pressure this morning.
It’s unlikely the fluctuations of the Lira are over so we should expect an increase in volatility as a result. The VIX bounced sharply on Friday indicating some fear is creeping into the markets. It will be incumbent on the Bulls to defend key support levels, or we could experience some technical damage in the index charts. Remain flexible, stay focused on price and be willing to shift if market sentiment begins to shift.
On the Calendar
We kick off the Economic Calendar this week with a very light day. We have a Bond Announcement at 11:00 AM Eastern. Then at 11:30 AM we wrap up the day with two Bond Auctions. I would expect no market reaction.
On the Earnings Calendar, we have just over 140 companies reporting today. Earnings numbers will begin dropping off this week, but although there will be fewer, we must remain vigilant, checking reports against holdings.
Action Plan
Asian markets were sharply lower overnight, and European markets also lower this morning as the collapsing economy in Turkey reverberates around the world. Dow Futures were down nearly 200 points around midnight but have since rallied significantly currently pointing to a market open about 75 points lower. Keep in mind a test of the overnight low would not be out of the question so plan your risk carefully.
Of course, even US Banks are being affected by the Turkish economic issues as they hold significant amounts of the countries debt. The SPY and DIA indexes have the majority exposure of the exposure to the banks and thus will likely experience some volatility as the Turkish currency fluctuates violently. Technically both the SPY and QQQ have failed at resistance however if the Bulls step up and defend support levels another push higher is certainly possible. If prices begin to fail key supports, the Bears could easily take control so keep an eye on price action and prepare for an increase in volatility.
Trade Wisely,
Doug
Price is King
With all our technology, designer scans and flashy indicators, there is one undeniable truth; Price is King. Traders will spend years trying to find the perfect combination of indicators and write complicated scans in a constant search for the holy grail. I’m no different and have to confess I wasted years on that quest. It was not until I became a student of price that I finally began to experience real account growth.
The simple concepts of price support, price resistance, and trend often get ignored as traders focus only on their indicators. Remember indicators don’t pay you! It’s only when price moves we can get paid. The last few days I have suggested caution and to be careful not to over-trade. Not because I want to see the market pullback but because of price action and price resistance was telling us to be cautious. Price is King and will provide the clues for better trading results if we become students of price.
On the Calendar
Friday begins with the potential market-moving CPI Report at 8:30 AM Eastern. Forecasters expect the CPI to rise 0.2 percent with the year-on-year coming in unchanged at 2.9 percent and the core rate at 2.3 percent. The Baker-Hughes Rig Count is a 1:00 PM and the Treasury Budget closes the day at 2:00 PM. Consensus for July is for a monthly deficit of 73.5 with both spending and tax receipts on the rise.
On the Earnings Calendar, we finally get a little break with only 46 companies reporting earnings today. Although the bulk of earnings reports this season are now behind us, we still have more than 400 on the calendar for next week so keep checking those earnings dates.
Action Plan
Although hopeful the Bulls could push us resistance levels yesterday, the Bears gained a slight upper hand by the close. Durning the night Asian market were mixed but mostly lower and Europian markets are currently lower across the board. As a result, the Dow futures are currently pointing to a gap down of nearly 100 points as I write this. At least, for now, it would seem that resistance has done its job but let’s not count the Bulls out just yet. A light pullback could be all that’s needed for the Bulls to gather energy and reinforcements to mount an attack on the highs.
As the weekend approaches, keep in mind, that the trade tensions between the US and China continue to grow. Carefully consider how much risk you’re carrying into next week with that in mind. There is a very good chance I will trim some positions and take some profits as take my normal trip to the bank on Friday. I wish you all a fantastic weekend.
Trade Wisely,
Doug
Riddle me this.
The market is currently presenting us with a difficult riddle. The Bulls and Bears appear equally matched as the indexes hover just below price resistance levels and record highs. Yesterday the Bears had an open invitation to push lower but lacked the conviction to get it done. On the other hand, the Bulls showed a willingness to defend current levels but also lacked the conviction to move up to test resistance. The riddle becomes even more complex with the current futures suggesting a flat open.
Should we buy hoping for a breakout or would it be better to take some profits and avoid adding additional risk? Indeed a difficult riddle for traders to resolve. My personal choice is to remain cautious and closely watch price action for directional clues. I will avoid adding risk this close to price resistance but have a watchlist of good stocks ready to go if the bulls show some conviction. If by chance the Bears attack I have profits locked with stop orders and ready to pick up some negative delta if necessary.
On the Calendar
Jobless Claims and PPI top the Economic Calendar today with both released at 8:30 AM Eastern time. According to consensus estimates the weekly Jobless Claims expect an increase to 220,000 vs. last weeks 218,000 but remains near historic lows. The PPI consensus is for a 0.3 percent monthly increase but exclude food, energy, trade services, and they forecast a 0.2 percent increase. We have a Fed Speaker @ 9:30 AM, Wholesale Trade @ 10:00 AM, the Natural Gas Report at 10:30 AM, 4-Bond events 11:00 AM and 1:00 PM, with the Fed Balance Sheet & Money Supply closing the calendar day at 4:30 PM.
Today we have another big day of earnings with more than 380 companies fessing up to their results. There are still a lot of companies yet to report this quarter but today marks the last of the very big day of reports this earnings season.
Action Plan
The Bears had an opportunity yesterday to move the market lower, but the Bulls dug in and showed a willingness to defend back. As good as that was to see, sadly the Bulls lacked the energy required to be very convincing. With the exception of the QQQ which managed a 0.12 increase the rest of the indexes finished the day slightly lower leaving us with more question than answers.
The Bulls defending this close to resistance levels and record highs in the QQQ and SPY suggests a desire to move higher. However, their lack of conviction keeps alive the concern that the resistance above could be stronger than there desire. Currently, the futures suggest a flat open which is not helping with this conundrum. Long story short we need remain cautious this close to resistance levels and stay focused on price action.
Trade Wisley,
Doug
Hopium
Are you make good business decisions or are you a trader addicted to “Hopium”? Without a doubt no matter how much profit a position may hold a trader always hopes for more. That’s a normal human reaction, but it’s not a good business decision. With the markets moving higher on lower volume and pushing against record highs and resistance levels have to take some profits or is hopium in control of your decisions?
I struggled with an addition to hopium for more years than I care to admit. I would let winning trades turn into losers always hoping for more. If your walking down the street and a $100 bill blows in front of you, do you stop and pick it up or do you let go by hoping for more? Of course, you pick it up, right? So I ask again are your making business decisions or are you addicted to Hopium, letting winners turn into losers rather than taking a smaller profit.
On the Calendar
The only potential market-moving event on the Wednesday Economic Calendar is the EIA Petroleum Status Report at 10:30 AM Eastern. There is not a forward forecast of US oil supplies however the current trade has proved to support higher prices. Other reports which are unlikely to move the market are, Mortgage Application @ 7:00 AM, A Fed Speaker @ 8:45 AM and a 10-YR Auction at 1:00 AM.
On the Earnings Calendar, we have a big day with nearly 400 companies reporting results. With so many reports it will hard to keep up so make sure you have a well thought out plan of the companies you own.
Action Plan
The Bulls put together another day of rallying toward resistance with slow grinding price action. However, with a little afternoon selling the indexes left behind candle patterns that suggest some caution is warranted. Overnight Asian markets we mixed but mostly lower while Europian markets are currently showing modest gains across the board.
With nearly 400 earnings reports this morning anything is possible by market open, but currently, US futures are mixed and indicating a flat to slightly bullish open. If you’re holding profitable positions, you may be time take some profits or tighten up the stops to protect the gains. Honestly, I hope the bulls push right on through resistance to new highs, but “hope” is not a wise way to manage the business of trading. Our job as traders is to make money, and that’s impossible to do unless we work to take profits consistently.
Trade Wisley,
Doug
SPY taking the lead.
It was nice to see the Bulls pushing for higher prints yesterday with the SPY taking the lead as the only index thus far being able to break above the prior high. Volume has been light, and price action has been somewhat tentative in this rally. With August being a big summer vacation month its not a big surprise to see lighter volume but it does require us to exercise some caution as we test price resistance levels.
Futures are pointing to a higher open this morning but remember as we test resistance levels we need to watch for possible reversals. As I mentioned yesterday, be careful with how much risk you’re carrying at resistance. As an example, I plan to take some profits reducing risk as we grind toward resistance rather than adding additional risk.
On the Calendar
The JOLTs report at 10:00 AM Eastern is the only potential market-moving report on today’s Economic Calendar. Forecasters expect job openings number to increase in May to 6.638 vs. 6.650 in June. Other than that, we have the Redbook @ 8:55 AM, two Bond events @ 11:30 AM and 1:00 PM with Consumer Credit closing the day @ 3:00 PM.
On the Earnings Calendar, we have more than 385 companies reporting to keep us on our toes.
Action Plan
Yesterday the bulls continued to push higher with a steady slow grind, but only the SPY managed to break above the prior high. The DIA, QQQ, and IWM all move up but continue to remain under price resistance. The SPY is now less than 2-points away from testing record highs, and with Futures currently pointing to a higher open, it seems likely to occur as long as there are no major surprises in earnings reports.
You may have noticed that volume has been quite light in this rally. While that is a bit of a concern keep in mind that August is a big vacation month and it not out of the ordinary. However, it does warrant a little caution as we approach resistance levels. Remember resistance is where we have to keep a watchful eye on price watching for the possible clues of breakout or failure.
Trade Wisely,
Doug
Long-Term Success
Having the discipline to follow a good set of rules is essential to achieving long-term success as a trader. A rule that has served me very well over the years is to avoid buying stocks at or near price resistance. That rule directly translates to the overall market as well. When the indexes are at or near price resistance levels as they are today, it’s very important to exercise some caution. As we push toward market highs, traders often over-trade loading up on positions very near where failure patterns appear.
Please don’t misunderstand I am not predicting a failure. I, in fact, want to see the market move higher! However, a bullish desire must not cloud your view of other possibilities. As the market approaches resistance, I want to be very focused on price action watching for both bullish and bearish clues. I want to evaluate my current holdings carefully and weigh the consequences of adding additional risk as an index nears a resistance level. Remember good trade management starts well before the position becomes part of your portfolio.
On the Calendar
A light day to begin this Monday on Economic Calendar with no market-moving reports expected. We have three Bond Events between 11:00 & 11:30 AM, the TD Ameritrade IMX @ 12:30 AM and Treasury STRIPS @ 3:00 PM to close the calendar day.
A very big week of earnings reports begins with more than 200 companies results today. Continue to prepare each day by checking earnings reporting dates against the stocks you own or are considering for purchase.
Action Plan
We closed last week with bulls pushing upward to test price resistance levels of the prior week. Unfortunately, they were unable to breakthrough giving us a reason to watch price action closely and approach this morning with a bit of caution. Asian markets were mixed but mostly lower while European markets are choosing to move higher. Currently, the Dow Futures are pointing to a modestly higher open with a busy Earnings Calander that could easily move it around before the open.
By in large earnings reports continue to roll in mostly positive, but the slide in the FB and NFLX continues to weigh heavily on the mind of the market and dampening enthusiasm. Last week the bulls proved the ability to defend against the political uncertainty of a US/China trade war. Now the question is do they have the energy to reclaim price resistance levels and hold them as support. As we test resistance, be careful not to overtrade and stay focused on price action clues.
Tade Wisely,
Doug
Whipsaw rally
A big morning gap down followed by a sharp whipsaw rally closed the day with the indexes testing resistance levels. It was nice to see the Bulls defend, but the question remains if they have the energy to reclaim this week’s highs. With trade war rhetoric flying around ahead of the weekend we will have to stay focused on price action and remain flexible.
With so much uncertainty and choppy price action, it’s very easy to get caught up in the drama and find yourself over-trading. This is the kind of market that can chop a traders account to pieces if you’re not careful and very disciplined to a set of rules. If you see your accounts grow, then congratulations and keep up the good work. However, if you see your accounts in decline, then it’s time to stop, and regroup. Remember doing the same thing over and over and expecting a different result is the definition of insanity.
On the Calendar
The Friday Economic Calendar gets going with two market-moving reports before the bell at 8:30 AM Eastern. First, the Employment Situation report which is expected to remain very strong with an increase of 190,000 new jobs. Consensus says the unemployment rate is 3.9 percent in July with a 0.3 percent gain in hourly earnings with average hours worked at 34.4. Second, the International Trade report expects the trade deficit in goods to widen slightly to 45.6 billion vs. the May reading of 43.1 billion. Then at 10:00 AM the ISM Non-Mfg. Index according to consensus will decline to 58.8 but continues to show exceptional strength. We a PMI Services Index report @ 9:45 and the Baker-Hughes Rig Count @ 1:00 PM to close out a very busy calendar week.
On the Earnings Calendar, the earnings reports slow down with just under 100 companies fessing up to their results. We have more than 1300 companies reporting next week so keep us on our toes.
Action Plan
After a substantial morning gap down the Bulls charged attempting to shake off trade war jitters and keeping traders off balance with the ship price action. As good as it was to see the Bulls defend, please keep in mind yesterdays rally let the indexes ver near resistance levels. Asian markets were mixed last night with European markets all slightly higher. Currently, the Dow Futures suggest a flat to slightly bullish open but keep in mind that could quickly change with a couple big market-moving Economic reports before the bell.
The choppy price action has been challenging, and that could continue with another big round of earnings next week. A,s you know, I like to reduce my weekend risk by taking some profits and avoiding adding new trades on Friday. However, you never say never and with so many reports now in the rearview mirror there are good opportunities as long as we can stay out of a trade war with China.
Trade Wisely,
Doug
Trade War Jitters
The insipid price action of yesterday made for a day about as exciting as watching paint dry. Then after the bell, the White House stated that the President is considering raising tariffs by 25% on Chinese goods. Markets hate uncertainty and re-ignition of trade war jitters moved Asian and European markets sharply lower overnight. US Futures are currently pointing to a significant gap down which will beak important price support levels and current trends in the index charts.
If you have money at risk, there will likely be losses today. Try to avoid emotional decision such as chasing short trades or revenge trading. Often that will only serve compound the losses. Follow your trade plan and stick to your rules. Taking a loss is never fun, but it’s part of being in business. When is it good to take a $500 loss; When you have to take a $1000 loss later! Stay calm, focused and disciplined.
On the Calendar
There are two potential market-moving reports on today’s Economic Calendar. At 8:30 AM Eastern consensus expects a reading of 218,000 in Weekly Jobless Claims vs. 117,000 last week. Then at 10:00 AM Factory Orders forecasters expect a solid increase of 0.9 percent. We have the Natural Gas report @ 10:00 AM, two bond announcements @ 11:00 AM, the Fed Balance Sheet & Money Supply closing the calendar day at 4:30 PM.
On the Earnings Calendar, we have nearly 500 companies reporting earnings today to keep us on our toes. Make sure your checking date on stocks you own or are thinking of buying.
Action Plan
Yesterday’s price action was choppy and with a slightly bearish feel even after the FOMC decision not to raise rates this month. Asian Markets tumbled during the night after in response to the President’s consideration of raising Chinese tariffs by 25%. European markets are also sharply lower, and the US Futures are pointing to a gap down of more than 150 points as I write this.
I would suggest caution today as the market reacts to trade jitters and creates technical damage in the indexes by dropping through current support levels and trends. Obviously, a morning gap down like this can create a lot of emotion and traders see once profitable positions turn into losses. It stinks but its part of the business, and we have to roll with the punches and avoid making emotional decisions. This is not the market to rush in and buy the dip. Remain calm, focused and disciplined to your rules and trading plan.
Trade Wisely,
Doug
The price action this week has been an absolute mess! Intraday whipsaw and daily overnight reversals have added a layer of complexity to an already very challenging market. When markets go through choppy periods like this, it’s common for traders to lose substantial sums of capital. It’s important for every trader remember that you have a choice. You can continue to fight the chop giving up your edge and watching your account shrink, or you can stand aside protecting you’re capital until your edge returns.
