Defensive Stocks
Consumer defensive stocks have quietly risen out of bottom patterns over the last few weeks, and many of them showed a burst of bullish energy yesterday. I’m beginning to wonder if we’re starting to see a quiet institutional rotation toward safety with so many of tech stocks priced at or near perfection levels. Please understand I’m not making a prediction I’m only pointing out what I see in charts.
The current trends are still up, and the Bulls continue to hold onto control as the majority of earnings thus far have been positive. Like I always do I will be ringing the register and taking some profits to lower my weekend and risk. Next week is another huge week of earnings so rest up this weekend because we could be in for another wild ride next week. Remember to take a look at those defensive stocks.
On the Calendar
We start the Friday Economic Calendar at 8:30 AM Eastern with the GDP report. If consensus is correct, the President is going to get the reading on GDP that he wants with a four in front. GDP expects a very strong 4.2 as the first estimate of the 2nd quarter with Consumer spending rising 2.9 percent. Forecasters see Consumer Sentiment at 10:00 AM to come in unchanged with a solid reading of 97.1 in July. The Baker-Huges Rig Count will close out this light calendar day at 1:00 PM.
On the Earnings Calendar, we have nearly 80 companies reporting with the vast majority of them coming in before the bell. Some of the noteworthy are, XOM, PSX, CVX, WY, TWTR, CL & GT.
Action Plan
Overnight Asian markets finished the day mixed while Europian markets are rising across the board with the trade tensions now in the rearview mirror. AMZN reported well last night but INTC another tech bellwether disappointed the market and is indicated sharply lower this morning. Consequently, US Futures indicate a mixed open with Dow pointing higher and the Nasdaq flat to slightly lower. Of course, that could easily change as we move toward the open due to a large number earnings reports before the bell.
Friday’s are more of a take profits focus rather than adding new risk ahead of the weekend. Although it’s likely, I will stick to that pattern but never say never as there are always possible trades setting up. So far the vast majority of earnings reports have been positive even with the disappointments from some of the so-called FANG stocks. However, there still seems to be a bit of tentativeness in the overall market with so many stocks priced for perfection. There was a noted improvement in consumer defensive stocks yesterday which may be a clue to an underlying rotation to safety. I wish you all a fantastic weekend.
Trade Wisely,
Doug
Information overload
Information overload! A barrage of earnings data, economic and political data will sweep over the market today. Futures suggest a modestly bullish open on the Dow while the Nasdaq braces for a substantial gap lower as 150 billion in FB value evaporated after the bell yesterday. At the same time, the market is breathing a sigh of relief with the agreement reached between the US and Europe averting a battle of tariffs.
How will the market respond? Your guess is as good as mine, but I plan to approach the morning cautiously and prepared for an extra dose of volatility. Expect fast price action and be prepared for quick reversal and whipsaws. Stay focused, flexible and disciplined.
On the Calendar
We kick off the Thursday Economic Calendar with three 8:30 AM report with the potential to move the market. Durable Good orders are looking for a gain of 3.2 percent bouncing back on May’s 0.6% decline due to a surge in aircraft sales. Remove transportation and core goods, and consensus expects a solid increase of 0.5 percent. International Trade in Goods according to forecasters will see the deficit widen from 64.8 billing in May to 67.2 in June. The Weekly Jobless Claims expects to show strong labor demand but with claims increasing this week to 219,000. Non-market- moving events include Retail & Wholesale Inventories @ 8:30 AM, The Natural Gas Report @10:30 AM, Kansas City Fed. @ 11:00, 3 Bond Events between 11:00 AM and 1:00 PM, Fed Balance Sheet & Money Supply wrapping up the day at 4:30 PM.
Today is the biggest day of the week on the Earnings Calendar with more than 320 companies scheduled to report. Stay on your toes.
Action Plan
The market has a lot to react to today that could create significant price volatility. First, we have more than 320 reporting earnings this morning. Secondly, the Tech sector will have have to face the huge disappointment from FB earnings and the stock erasing 150 billion in value overnight. Last but not least a major agreement between the US and the EU effectively ending the trade war with one of our strongest allies. As I write this, the Dow Future are pointing to a slightly bullish open, but the Nasdaq is bracing for a rough open after the sharp decline in FB.
I think its fair to say anything is possible so stay flexible and focused on price action. Plan to see some very fast price action during the morning rush and remember fast intraday reversals are possible with so much data to chew through. Prepare for what could be a wild and challenging day.
Trade Wisely,
Doug
Fear-Of-Missing-Out
During earnings season all traders experience the Fear-Of-Missing-Out emotion. We see the big price moves and the potential of making the big bucks, and we race blindly to get our piece of the pie. As emotion grows, discipline gets pushed aside, and the trader begins to break every trading rule in the book. If you owned a trading firm and your traders acted in such a way you would fire them on the spot. Right?
Remember trading is a business. You are competing with the best and brightest and believe me; they want your money as much as you want theirs. As a retail trader, you must hold yourself accountable and maintain your discipline at all times. If you let emotions such as the Fear-Of-Missing-Out drive your decision making then get ready to watch your money disappear.
On the Calendar
New Home Sales and the Petroleum Status Report are the potential market-moving events on today’s Economic Calendar. According to consensus the June new home sales at 10:00 AM eastern will decline to 668,000 vs. 689,000 May reading. Then at 10:30 AM we will get the latest reading on unforecast US Petroleum Supplies. We have at 7:00 AM report of Mortgage Applications and bond auctions at 11:00 AM as well as 1:00 PM to wrap up the calendar day.
On the Earnings Calendar, the reports continue to ramp up with more than 230 companies scheduled. Among the pre-market reports are BA, KO, UPS & GM with post-market reports including FB, F, LVS, & MAT.
Action Plan
A very nice move higher yesterday with the market reacting the to positive earnings reports. However, the overall price action of the day was anything but smooth experiencing two nasty whipsaws. Overnight Asian and European mixed seeming to follow the lead of the bullish but choppy US indexes. Futures are taking a wait and approach this morning with more than 100 earnings reports to react to before the bell. With more than 600 reports between now and the close on Friday, we and expect a surge in price volatility as the market reacts.
If you’re inexperienced, it may be best to stand aside and watch the drama unfold from the safety of the sidelines. Those who do trade will have to stay very focused on price action clues and willing to hold through potentially violent intra-day swings and large morning gaps. Although the earnings drama fuels the Fear-Of-Missing-Out and the desire to rush, we need to stick to our rules maintaining a business focused discipline. If you trade your emotions, you’ve already lost the battle.
Trade Wisely,
Doug
Indexes hold key supports.
Although a slow and choppy day the indexes hold key supports as they waited for after the bell earnings reports. Of course, the tech behemoth GOOG was the most anticipated, and once again the company sailed past estimates gaining nearly $50 a share in aftermarket trading. Futures that flat-lined all day became decidedly bullish and maintained that stance through the night. Asian and European markets were also bullish overnight and helping the Futures that are currently suggesting a substantial gap up open.
Be careful not to get caught up in earnings euphoria and chase into stocks that are near resistance levels. Remember, that warm and fuzzy feeling we get from good earnings reports can quickly reverse with so many companies reporting. I’m not hoping for or anticipating that I’m only reminding everyone we need to remain flexible, focused and prepared to adjust with market conditions.
On the Calendar
The only potential market-moving report on the Tuesday’s Economic Calendar is the 9:45 AM PMI Composite Flash Report. Consensus expects the PMI Composite to come in at 56.3, manufacturing at 54.9 and PMI services at 56.4 for July. We have the FHFA Housing Price Index at 9:00 AM, the Richmond Fed Manufacturing Index at 10:00 AM and two Bond Auctions at 11:30 AM & 1:00 PM to finish up the day.
Earnings reports continue to ramp up with 144 companies reporting today.
Action Plan
Yesterday’s price action was mind-numbingly slow and choppy waiting for the after the bell earnings reports topped by GOOG. After the reports, the Futures became decidedly bullish and remained so all night. Asian and European markets also took the queue trading higher across the board. As I write this, the Dow futures are pointing to a substantial gap up of nearly 100 points. However, with a large number of earnings reports before the bell this morning that could certainly change.
GOOG blew the doors in its earnings report lending credence to the bullish anticipation of this quarters tech results. Financial’s were also a bright spot for the market yesterday with many of the big banks starting to recover breaking multimonth downtrends. With so many companies reporting this week keep in mind that price action can be very fast and challenging to trade even for experienced traders. While it’s true, the market looks bullish and likely to gap up today that can easily reverse as companies report. Stay nimble and plan your risk carefully.
Trade Wisely,
Doug
Earnings
Earnings season can be challenging for even the most experienced traders. With the NASDAQ and many of the stocks that make up the index at or near all-time highs, they will be under tremendous pressure to perform. An earnings beat can still disappoint the market if the anticipation was too high. Believe me, I want earnings to be good and for the market to move higher but I can’t help but notice that some of these companies look quite extended. So be careful and guard yourself against getting caught up in the drama.
Remember anything is possible at earnings, and if your biased or become emotional you’ve compromised, you’re decision-making ability. Hold to your rules, stay focused on price and avoid gambling. It could be a wild week of big morning gaps and whipsaws so buckle up and trade wisely.
On The Calendar
Existing Home Sales at 10:00 AM Eastern is the sole potential market-moving report on the Monday Economic Calendar. Forecasters came to a June consensus of 5.450 million annualized rate increased only slightly from 5.430 in May. Other than that we have The Chicago Fed National Activity @ 8:30 AM and three bond events between 11:00 AM and 11:30 AM to close the calendar day.
A big week on the Earnings Calendar with over 800 companies and nearly 1/3 of the of the S&P-500 reporting this week. Make sure you are checking earnings reporting dates before making decisions on trades.
Action Plan
We should expect a wild and wooly with the possibility of big morning gaps and intraday whipsaws as over 800 companies step up to report earnings. Expectations of bullish reports seem to be quite high, and many stocks have rallied in anticipation. Keep in mind with high expectations even good reports could find sellers with the market having expected even more.
Expect fast price action with all the pent-up earnings drama spilling out at the market open. Turn off the financial news or risk getting caught up in the drama becoming biased and end up making emotionally based decisions. Focus on price and remember this is the perfect environment for whipsaws. Last week the Bulls did a very good job of holding the indexes above key support levels. A bullish sign to be certain but with may stocks like AMZN and FB at or near record highs before earnings there is a lot of pressure to perform. Plan your risk carefully and remain flexible and be prepared for challenging price action.
Trade Wisely,
Doug
Trade Jitters
Trade jitters are once again front and center after and tough talk by the President in a CNBC interview this morning. The President said he was ready to deploy 500 billion in China tariffs. As a result, the futures are pointing to a lower open this morning. Perhaps the good reports from MSFT, HON, and even the troubled GE will inspire the Bulls to defend, but political uncertainty is a tough thing battle right before a weekend.
Except for the bullish shown by the market on Tuesday, price action has been choppy and challenging this week. The good news is that the current trend is up and the Bulls have to this point defended key price supports. Remain flexible, unbiased and focused on price action clues.
On the Calendar
A rare Friday on the Economic Calendar with no market-moving reports. We have a Fed Speaker at 8:20 AM Eastern and the Baker-Hughes Rig Count report at 1:00 PM to finish the calendar week.
We have 36 companies reporting earnings today with the far majority happening before the open today. Among those reporting before the bell is GE, HON, SWK, RF, SLB & KSU.
Action Plan
Asian markets were mixed but mostly higher overnight, while European markets traded lower. US Futures were negative but has started to move toward the open, but in an interview with CNBC, the President choose to fan the flames of the trade war sending futures quickly lower. As I write this, there is still 2 hours before the market opens and with a bunch of earnings reports before the open anything is possible. MSFT beat both on the top and bottom line yesterday sending the prices of the tech giant to all-time highs.
The Bulls did a good job yesterday of defending price support levels. With the trade war jitters now back on the mind of the market the question is will they have the energy to do it again today? I must admit with the strong earnings from MSFT I was hoping for at least a little Friday bullishness, but hope currently seems less likely after the 500 billion tariff presidential remarks. As you know, I like to go the bank on Friday taking profits rather than adding risk ahead of the weekend. It’s unlikely that change today but in this business, you always have to remain flexible. Have a great weekend!
Trade Wisely,
Doug
Financial Sector Rally
The financial sector rally accounted for the majority of yesterday’s bullish price action in the Dow and SPY. XLF the popular financial ETF rose 1.60% yesterday finally breaking a 6-month sector downtrend. The tech sector took a little break yesterday and the QQQ chopped sideways on light volume. Perhaps the earnings from MSFT this afternoon will provide the tech sector a bit of inspiration.
The Futures are indicating some downward pressure at the open but as long as the current price supports hold the Bulls should maintain control. After such a strong two week rally a little rest or even a small pullback would be healthy for the market assuming the bulls defend price supports. Keep in mind with more than 100 companies reporting today anything is possible. Set aside your bias and stay focused on price action.
On the Calendar
Thursday’s Economic Calendar has only two potential market-moving reports both of which come out at 8:30 AM Eastern. Consensus expects Weekly Claims to come in slightly higher at 220,000 vs. 214,000 last week. Then the Philly Fed Business Outlook is looking for an increase in July to 22.0 vs. the 19.9 June reading according to forecasters. After that, we have a Fed Speaker @ 9:45 AM, Leading Indicators @ 10:00 AM, Natural Gas Report @ 10:30 AM, 6-bond related events between 11:00 AM & 1:00 PM, The Fred Balance Sheet & Money Supply @ 4:30 PM to close the calendar day.
On the Earnings Calendar, we have 103 companies reporting today. Please make it a habit of checking earnings reports on the companies you own and those you are considering for purchase. Next week earnings season ramps up with over 800 companies expected to report results.
Action Plan
Overnight Asian and Europen were mostly lower putting some downward pressure on the Futures markets. Also after the close yesterday, EBAY and AXP were among several earnings reports that beat on the top line but failed to hit revenue projections sending the stocks lower in aftermarket trading. Let’s hope this doesn’t become a trend this quarter! CSCO was one of the bright spots beating on the top and bottom line, but the stock only enjoyed modest gains. AA also topped estimates but guided lower siting higher energy prices and tariff impacts raising their cost of production.
Market gains in the last couple days have come mostly from the financial sector while other areas have been slow and downright choppy. If you’re feeling a bit frustrated, you’re not alone! Currently, the Dow futures are pointing to a lower open and considering we have been up for almost 2-weeks that’s not a big surprise. Perhaps with a large number of earnings this morning the bulls will at least find enough inspiration to hold price support levels. MSFT reports after the bell today and its results could set the tone for the end of the market week.
Trade Wisely,
Doug
Go Bulls
After the disappointing results from NFLX, I was ready if the Bears tried to take control but happily enjoyed increasing profits as the Bulls dug in pushing all the major indexes higher. The NASDAQ set a new record high, and the Dow managed to hold the big psychological level of 25,000. Go Bulls!
I, of course, would like to see the Bulls continue to drive forward but I also need to acknowledge the fact that the market has moved up very sharply and rest or pullback are certainly within the realm of possibilities. As a result, I want to avoid chasing stocks already within a rally, and I want to be very cognizant of resistance levels. As stock price near resistance levels, I want to more of a seller than a buyer, taking profits into strength. Don’t misunderstand; I am in no way suggesting that the market is about to become bearish, I’m only pointing out that adding risk when a stock is at or near resistance is something I want to avoid.
On the Calendar
Today we have three potential market-moving reports on the Economic Calendar. Frist is the Housing Starts at 8:30 AM which expects a decline in June to 1.320 million vs. 1.350 in May with permits ticking higher to 1.329 million vs. the 1.301 May reading. At 10:30 AM we have the unforecast EIA Petroleum Stats Report which could be very important today will oil prices falling. The to wrap up the calendar day we have the Beige Book at 2:00 PM which the Fed uses as part of its interest rate policy decision. Other than that we have Mortgage Applications at 7:00 AM and the Fed Chair Speaking at 10:00 AM before the House Financial Services Committee.
The Earnings Calendar shows we have 66 companies expected to report results today. Among them are MS, and USB that report before the bell with IBM, KMI, AA and AXP reporting after the close.
Action Plan
I was happily surprised to see the bulls respond in such a strong and deliberate manner yesterday after NFLX disappointed the market. The DIA & SPY broke above price resistance as the QQQ’s reached out for new record highs. Markets around the world were mostly higher overnight but as I write this Futures are flat to just slightly bullish. However, with all the earnings reports and the Housing Starts number out before the open anything is possible.
After recovering key price levels, the Bulls seem confidently in control but let’s not forget that the indexes have moved up quite sharply and a little pullback or rest to test new supports is not out of the question. Which means be very careful entering stocks that have already several days into a rally and avoid buying if prices are at or near new resistance levels. There seem to be high expectations for strong earnings this season, and I hope they are correct but stay flexible and focused on price action. Trade the chart and avoid getting caught up in drama and hype surrounding earnings. Go Bulls!
Trade Wisley,
Doug
The Mighty Stumbles
Even the mighty stumbles from time to time as the highly anticipated report from NFLX disappoints the market and weighs heavy on the entire tech sector. Undoubtedly you will hear from traders see posts in social media today about those that made a bundle on the $50 point fall in NFLX after the bell yesterday. I say congratulations to them for a winning position, but don’t believe for a second they have the powers of prediction. Remember there were likely even more traders that lost a bundle betting that NFLX would move up sharply as it has done for years.
That’s right I used the word betting because trading earnings is very much the same as placing a bet on red or black at a roulette table. We have all seen stocks sell off after good earnings reports and stocks rally after bad earnings reports. There is no way to know for sure how the market will react to an earnings report. If you make a habit of gambling on them, you’re not likely to be in this business very long. Think about it; we only seem to hear from those that bet and win after the fact, and we never hear about there big losers. Hmmm, I wonder why?
On the Calendar
We get the Economic Calendar going at 9:15 AM Eastern with the Industrial Production report. Consensus expects a gain of 0.6 overall with Manufacturing up 0.8 percent in June while capacity utilization pressures rise to 78.3 percent. At 10:00 AM the home-builder confidence is expects to hold steady at 68 according to consensus in the Housing Market Index report. We also have a Fed Speaker at 10:00 AM and two bond auctions at 11:30 which are unlikely to move the market. Wrapping up the is Treasury International Capital at 4:00 PM which tracks the flow of financial instruments but is not forwardly forecast.
On the Earnings Calendar, we have 42 companies reporting as earnings session ramps up activity. Before the bell, we will hear from GS, JNJ, PGR SCHW & UNH to name a few impacting the morning open. After the bell, UAL, CSX, IBKR, & LTXB are among those fessing up to results.
Action Plan
High expectations turned to deep disappointment after the bell yesterday when NFLX reported earnings results. In aftermarket trading, the stock fell more than $50 a share dragging down other tech shares in reaction to the news. The QQQ’s in the pre-market is pointing to a lower open and may raise concerns about the performance of the tech sector as we wait for more big companies to report. Currently, the Dow Futures are suggesting a flat to slightly bearish open as I write this but there are several big earnings reports yet to happen that could easily change that.
Financials had a very good day yesterday, and if that continues perhaps, that will help the Dow stabilize its wild price action of late. Let’s hope for the best but prepare for the worst as it appears this could be a wild earnings session. The markets hates uncertainty, and the NFLX just reminded everyone that there is nothing certain when it comes to earnings reports.
Trade Wisely,
Doug
Earnings Session
As we begin this earnings session, the DIA and SPY are challenging important resistance levels while the QQQ is at new record highs. We can expect the Futures to be volatile and the likelihood of significant morning open gaps as the market reacts. Earnings season can be very challenging but can also be very rewarding. Here are a few ideas that have served me well during earnings.
- Never be caught off guard. Always know when a company your holding or one you’re considering to purchase is reporting earnings.
- Turn of the News. Remember the mainstream financial new is about entertainment and advertising. If you get caught up in the hype and drama, your trading will be affected. (I only watch the headlines and form my own opinion based on actual price action)
- Focus on the chart patterns and the price action and avoid trying to predict how the market will react to an earnings report.
- Stick to your rules and plan each trade. Always remember trading is a business and emotional decision making has no place in business.
On the Calendar
The Monday Economic Calendar starts the week with three market-moving reports. At 8:30 AM, we will hear from Retail Sales that expects a sizable 0.6 percent headline gain according to consensus. Also at 8:30 AM, the Empire State Mfg Survey, is expected to remain strong but decline slightly to 21.0 vs. June’s 25.0 reading. The at 10:00 AM, Business Inventories are expected to increase by a healthy 0.4% according to forecaster estimates. To finish up the calendar day we have, we have a Bond Announcement at 11:00 AM, and two Bond Auctions at 11:30 AM.
On the Earnings Calendar, we have 26 companies reporting. Before the bell, we will hear from BLK, BAC & JBHT. After the bell most notable is NFLX.
Action Plan
With a busy Economic Calendar, this morning and big earnings report’s, the market will have plenty of data to react to this morning. If that were not enough the news could also be a factor as the President meets with Russian Leader Vladimir Putin in Helsinki today. Futures are currently pointing to a slightly bullish open as but that could easily change with each report.
Earnings Season can be challenging for traders due to the uncertainty and volatility they can create. Large morning gaps can become the norm as the market reacts to the results so plan your risk accordingly. If you watch financial news networks, guard yourself against being caught up in the drama and the ridiculous predictions which no one is ever held accountable. Focus on the chart patterns and price action setting aside personal bias as you plan each trade.
Trade Wisley,
Doug
Consumer defensive stocks have quietly risen out of bottom patterns over the last few weeks, and many of them showed a burst of bullish energy yesterday. I’m beginning to wonder if we’re starting to see a quiet institutional rotation toward safety with so many of tech stocks priced at or near perfection levels. Please understand I’m not making a prediction I’m only pointing out what I see in charts.
