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
Earnings Season Begins
Yesterday’s big overnight reversal brought out the Bulls as the market shook off trade war jitters and turned it’s focus to earnings season. The NASDAQ set and a new record high with MSFT, AMZN, GOOG and FB leading the way record high prices at the close. Now the big question is can the Bull follow-through to close the week with another gain or will we see some profit-taking ahead of the weekend?
A lot will depend on how the market reacts to the earnings reports from JPM, C, PNC, and WFC which all report before the bell. The DIA and SPY closed yesterday near significant price resistance levels. Can the Bank earnings provide enough inspiration to pop through? That would sure be nice, but there is no need to predict is we simply stay focused on price action and follow the clues it provides. The good news is that the market is showing strength and just maybe the trade war chop will fade into the background for a little while.
On the Calendar
Import and Export Prices kicks off the Economic Calendar on Friday at 8:30 AM Eastern. According to Consensus, June will see an increase of 0.1 percent for import prices and 0.3 percent gain for export prices. Consumer Sentiment at 10:00 AM expects a strong 98.4 print in this preliminary reading in July. After that, we have the Fed Semiannual Monetary Policy Report, a Fed Speaker at 12:30 PM and at Baker-Hughes Rig Count at 1:00 PM, none of which are likely to move the market.
Today is the official kick off the 3rd quarter earnings. We will hear from, JNJ, C, PNC, and WFC before the bell and will be the most notable reports of the eight companies reporting today.
Action Plan
After yesterdays very strong rally led by the NASDAQ which made a new record high, we face the kickoff the 3rd Quarter Earnings. As I write this Futures are just slightly positive, but likely to bound around a lot with several big banks reporting before the bell. If they happen to exceed the market’s expectations, we could see a gap up open but if they disappoint a gap down at the open could be the result. Only time will tell, and as retail traders, all we can do is wait, watch and then determine the best course of action.
To avoid some of the uncertainty, I mentioned that I would likely close or take partial profits on positions which I did do before the yesterdays close. Normally Friday is profit-taking-day for me so I will likely continue banking gains today to reduce my weekend risk. Keep in mind the DIA, and the SPY are facing significant price resistance levels this morning. After such a big move yesterday a pullback would not be out of the question, but if the big banks beat the market’s expectations this morning, perhaps the bulls will find the inspiration to follow-through higher. I wish you all a great day and a fantastic weekend.
Trade Wisely,
Doug
Bullish Overnight Reversal
After witnessing sellers in control at the close yesterday, seeing the Dow Futures pointing to more than a 150 point bullish overnight reversal is a nice relief. If buyers step in supporting this gap, then the Dow has successfully held it’s 50-day average. However, we need to keep in mind that nothing has changed on the trade war front and remember gaps invite the possibility of whipsaw price action and exercise a little caution at the open.
Remember 3rd Quarter Earnings officially kick off Friday with JPM, C, PNC and WFC all reporting before the bell. There seems to be a great deal of anticipation of good results this quarter. Perhaps the banks can provide just enough inspiration for the bulls to hold today’s gap and push the market higher to close the week. Only time will tell.
On the Calendar
W have two market-moving reports to kick off the Economic Calendar at 8:30 AM Eastern this Thursday. First up is Consumer Price Index that consensus suggests a 0.2 percent gain in June with a core number also up 0.2 percent. Year-on-year PPI expects a one-tenth increase to 2.9 percent. Next is the Weekly Jobless Claims which forecasters expect a decline to 225,000 from last weeks reading of 231,000 as labor demand remains very strong. At 2:00 PM we will get the Treasury Budget which is expecting a monthly deficit of 91.0 billion. W have 2 Fed Speakers today at 12:15 PM and 8:00 PM, several non-market-moving reports, and four Bond Announcements to finish up the busy calendar day.
On the Earnings Calendar, we have 19 companies reporting with one of the most notable being DAL before the bell. Keep in mind earnings season officially kicks off on Friday with several big banks reporting.
Action Plan
The ugly price action yesterday seems to have inspired the bulls to get moving this morning. Asian and European markets are both higher overnight and the Futures are currently pointing to a substantial gap up open. As I write this, the Dow Futures suggest better than a 150 point reversal of yesterdays close. As always be careful about chasing gap, but if we see buyers stepping in to support the gap, then the Dow has at least for now passed the test of holding its 50-day average. A good sign indeed. However, it’s always wise to watch for the potential whipsaw after a gap that could bring prices right back down.
There seems to be a great deal of anticipation of strong earnings this quarter with some of the big techs simply rejecting yesterdays selloff and moving higher. If the bulls do show support today and with some good big bank earnings on Friday we still have the chance of closing this week on a high note. Let’s keep our fingers crossed.
Trade Wisely,
Doug
Trade War Strikes Again
In yesterday’s blog and video, I made mention of the fact that nothing had changed in the so-called trade war and to be careful as we approached price resistance in the index charts. Obviously, price action is not predictive of political speed bumps, but it did let us know prices were a bit overextended in the short-term. I also mentioned yesterday the powerful emotion created by the “fear of missing out.”
We see the index ripping higher, and traders get that ugly feeling that you’re missing everything. Even though the rally is well underway our vision becomes clouded by this strong emotion causing to chaise, and buy at or near price resistance. Unfortunately, this bad habit is often quickly punished as the stock or the index pulls back, and you have to watch your capital disappear. It’s a tough lesson to learn, and I hate to think about all the money I lost over the years as the market beat this lesson into my thick head. A rule that has served me well is to sell stocks at or near price resistance, don’t buy at or near resistance.
Due to loss of power I will have to cut this short the blog short this morning as I’m running our of time.
Trade Wisely,
Doug
Too much of a good thing?
It’s always nice when we see the bulls step up and take charge breaking prices through resistance levels. However, we can sometimes have too much of a good thing moving too far to fast. I’m not suggesting that happened yesterday but, I do think its wise to consider the possibility. That means I must stay focused and flexible being very careful not to by stocks near resistance levels and watching for signs of profit taking.
Let me be clear; the bulls are currently in control and the Futures suggest another bullish open is likely with the Dow gaping up more than 50 points. I am only suggesting that you set your rose-colored glasses aside and stay focused. Have a plan to protect your current profits and try to avoid chasing. The fear of missing out is a powerful emotion, but if you chase a run already extended, you’re likely to experience a painful lesson.
On the Calendar
The JOLTS report is the only potential market-moving news on the Economic Calendar today. At 10:00 AM forecasters expect a 6.700 million total jobs openings in June, showing incredible strength in labor demand. For the first time in 20 years, there are more open positions than there are unemployed looking for work! The NFIB Small Business Optimism Index @ 6:00 AM, Readbood @ 8:55 AM and bond auctions at 11:30 AM & 1:00 PM to compleate the calendar day.
On the Earnings Calendar, PEP is one of the most notable of the 15 companies expected to report today. With earnings season beginning soon make sure your checking when a company reports. Failure to do so can be a costly mistake.
Action Plan
A big day for the bulls yesterday as buyers stepped in after the morning gap pushing all four of the major indexes higher. Currently, the futures are pointing to a gap up open but be very careful not to chase. In just 3-days the Dow has rallied more than 575 points, but T2122 is suggesting a reversal or consolidation could begin at any time. Keep in mind after breaking above the 50-day average it’s pretty common for the Dow to test it as support. I am certainly not predicting bearishness or that the market will absolutely reverse today. I’m only pointing out the possibility. If the bulls have enough juice, there is no reason they couldn’t extend this bull run.
Rather than chasing the run I will be more inclined to take some profits or use this bullishness to hedge positions by selling out of the money calls. The QQQ and IWM will be very close to new record highs at the open, so it would not be out of the question to see a pause or even some profit taking. Stay focused and flexible.
Trade Wisely.
Doug
Bullish Open
The Futures are pointing to a bullish open this morning with world markets follow US Friday rally. Political trade war rhetoric was kept to a minimum over the weekend allowing the markets to focus and follow-through on the very strong employment situation report. With the odd holiday week behind us, volumes should improve as the markets look forward to 3rd quarter earnings season kicking off this coming Friday with several big banks reporting.
This morning the Dow is gaping up right into its 50-day average that could serve as resistance so it would be wise to exercise a little caution because we are not out of the woods just yet. There is no need to rush or predict, wait for proof that buyers are stepping in supporting this morning gap. There is still technical damage to repair, but the positive price action in the QQQ, SPY, and IWM are encouraging that the bulls are finding their footing.
On the Calendar
A light day on the Economic Calendar to kick off this week of trading with no expected market-moving reports. We have a Fed Speaker at 9:10 AM, three bond events between 11:00 AM & 11:30 AM, TD Ameritrade IMX at 12:30 PM with Consumer Credit at 3:00 PM closing the calendar day.
We have just nine companies reporting earnings today with the most notable being HELE coming out before the bell today.
Action Plan
We got through the weekend without increasing trade war concerns. Asian & European markets were bullish overnight following our Friday rally based on good jobs numbers and a huge improvement in the international trade deficit. As I write this mornings blog, the Dow Futures are pointing to a gap up open of more than 100 points at the open. With nothing on the Economic or Earnings calendar likely to change that a follow-through of Friday’s bullishness is likely as long as politics stay out of the news.
The Dow, however, presents a bit of a conundrum this morning gaping up yet still under its 50-day moving average. The exact place where a failure could occur. The SPY, QQQ, and IWM are in a far stronger pattern having held their 50-day averages and finding buyers to rally them off these key supports. Keep in mind the SPY, QQQ and IWM all have price resistance levels above to watch closely. With the Holiday week now behind us and 3rd quarter earnings beginning at the end of the week, volume should show improvement and hopefully so will daily whipsaw in prices. Although I’m hoping price action will now begin to improve, we must still exercise caution when we see pre-market gaps into resistance levels. Whipsaws and full reversals are possible. After the morning rush watch for clues that buyers are stepping in supporting the gap. Remember the old saying, fool me once shame on you, fool me twice shame on me.
Trade wisely,
Doug
Choppy Week
I don’t know about you, but I will be happy to see this choppy, week come to an end. I have spent the better part of the last 2-weeks talking about caution and avoidance of the choppy price action. That caution has proved to have been correct, but just like everyone else I’m tired of the chop and hope next will be better as traders return from extended holiday vacations.
However, I plan to remain cautious into the weekend with the uncertainty of trade war rhetoric ramping up. As of yesterday, every one of our positions held unrealized gains so I will be far more focus on taking profits today than I will be about adding risk ahead of the weekend. With 3rd quarter earnings season kicking off next week the market will at least have something else other than political wrangling from which to draw inspiration.
On the Calendar
We kick off the Economic Calendar this Friday with two potentially market-moving the reports at 8:30 AM Eastern. First, consensus expects the Employment Situation report to show new job growth of 190,000 with the unemployment rate down to 3.8 percent. Hourly earnings are also moving up in June with consensus suggesting a 0.3 increase and a year-on-year rate up to 2.8 percent. The International Trade deficit is expected to narrow sharply to $43.7 with a 2.1 percent increase for exports while the imports only gained 0.2 percent. After that, we have the EIA Natural Gas Report @ 10:30 AM, the Baker-Hughes Rig Count @ 1:00 PM and Treasury STRIPS @ 3:00 PM.
A very light day on the Earnings Calendar with only three companies reporting. Keep in mind is the calm before the storm of 3rd quarter earnings which officially kicks off next week when some of the big banks report.
Action Plan
I plan to wrap up the end of this odd trading week much the same as it began with caution. Yesterday day ending on a positive note but whipped several times on anemic volume. Currently, Futures are pointing to a negative open as the market reacts to the tariff battle. Keep in mind with the Employment Situation number which comes out before the open that could quickly change.
Next Friday the 3rd quarter earnings season will get underway giving the market more to think about other than political uncertainty. Perhaps we will finally exit this choppy consolidation and pick a direction next week. Volume should improve next week as traders return from their extended holiday vacations and price action should become more deliberate without all the whipsaws. Trade war rhetoric could ramp up this weekend as both the US and China lob threats back an forth. Plan your risk into the weekend carefully.
Trade Wisely,
Doug
Whipsaws
Over the last five days of trading, we have seen the market open with significant gaps follow by whipsaws. Twice the market gaped down only to find buyers and whip back up. There were also three days when the market gaped up only to end the day lower as seller whipped prices back down. So after 100’s of points of daily travel in Dow whats the result? The Dow is up a whopping 59 points!
So the fact that the Dow Futures are pointing to another gap of about 150 points this morning ahead of tariff increases and the FOMC minutes release should we be rushing to enter trades? Fool me once shame on you, fool me twice shame on me. Don’t allow the fear of missing out to control your trading decision, wait for better price action or wave goodbye to your capital as the market continues to chop up accounts.
On the Calendar
A busy day on the Thursday Economic Calendar. Potential market-moving reports begin at 8:15 AM with the ADP Employment Report which the consensus expects 190,000 jobs created in June but keep in mind ADP’s accuracy is very hit and miss. Weekly Jobless claims come out at 8:30 AM and forecasters expect a decline to 223,000 vs. last weeks reading of 227,000. The unforecast EIA Petroleum Status report is at 11:00 AM and last but not least is the release of the FOMC minutes at 2:00 PM. Non-market moving reports include Mortgage Applications @ 7:00 AM, Challenger Job-Cut Report @ 7:30, Consumer Confort Index & PMI Services Index @ 9:45, five Bond Announcements, Fed Balance Sheet & Money Supply @ 4:30 PM.
On the Earnings Calendar, we have only six companies reporting today that are unlikely to move the market.
Action Plan
It’s interesting that the US Futures are positive today in light of the fact that Asian markets were moved lower during the night with new tariffs set to begin tomorrow. Of course, with have seen big daily morning gaps the last several days that have proved punishing for those that chased the open. Will today be different? Only time will tell, but it would also be wise to remember that the FOMC minutes will be out at 2:00 PM today and volume could easily be anemic with traders extending their holiday vacations. It would not be at all uncommon for the market to become light and choppy as we wait for the FOMC minutes.
I intend to remain cautious particularly during the morning rush. Remember whipsaws are possible just like we have seen the last five trading days in a row. Also, keep in mind that the Big Employment Situation number will be out Friday before the market open, so another big morning gap is possible. The big question is in which direction?
Trade Wisely,
Doug
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!
