Consolidation?
Once again the small caps manage to set new record highs. However, the DIA, SPY and QQQ’s remain stuck between significant levels of support and resistance. Currently, the Bulls and Bears seem equally matched and seem to have slipped into a tight range consolidation at least for the short-term.
Futures are pointing to a higher open but that open looks as if it will occur inside the range of the consolidation. Perhaps one side or the other will be able to find some inspiration in the news, but I wouldn’t be at surprised to see another day of 2-sided price action.
On the Calendar
There is nothing on Friday’s Economic Calendar likely to move the overall market. We have Fed Speakers at 3:00 AM, and two at 9:15 AM. Then at 1:00 PM is the Baker-Hughes Rig Count to close out the day.
The Friday Earnings Calendar only has eight companies reporting as 2nd quarter earnings wind down. However, there are two noteworthy reports from CPB and DE that happen before the bell.
Action Plan
Yesterday we saw a little 2-sided price action with the bulls and bears equally matched and settling into a narrow consolidation pattern. With light days on both the Economic Calendar and the Earnings Calendar, the market may have to look for inspiration from the trade negotiations news. Currently, the Futures are pointing to a bullish open, but the DIA, SPY, and QQQ all look as if they will open in the consolidation range. After the morning rush, I would not be at all surprised to the price action become light and choppy as we head into a summer weekend.
As always my primary focus ahead of a weekend is profit taking rather than adding additional risk. Of course, any trades that you plan to hold through the weekend should have thoughtfully places stop orders in place as well as hedges to the position or portfolio. It’s been a fabulous week of profits so let’s keep that going right into the weekend. I wish you all a wonderful weekend.
Trade Wisely,
Doug
Russell, New Record High!
Yesterday turned out to be very productive for current positions. The Russell poked a finger in the eye of resistance breaking through to a new record high. The SPY and QQQ had solid moves higher with the DIA lagging in more of a consolidation pattern. Currently, the Futures are pointing to a flat to slightly lower open however that could quickly change with earnings reports and economic news. Today is the Speaker Ryan’s imposed deadline on the North American Trade Agreement and the trade negotiations with China begin as well.
Although IWM set a new record high yesterday keep in mind the SPY, QQQ, and DIA remain under significant resistance levels. As a result, we must watch for the possibility of reversal at or near resistance and prepare plans if the unfortunate event occurs. Business requires planning and trading is a business like any other!
On the Calendar
Market-movers on today’s Economic Calendar are the Weekly Jobless Claims and the Philly Fed Survey both of which come out at before the bell at 8:30 AM Eastern. Consensus estimates suggest Jobless Claims will increase to 215k vs. the last reading at 211k but continue to demonstrate a strong labor demand. The Philly Fed Survey forecast is 21.0 for May vs. the April reading of 23.4 as it pulls back from a nearly 50-year record high. The reports not expected to move the market, Consumer Comfort, E-Commerce Sales, Leading Indicators, Natural Gas report, 8-bond related events, Fed Balance Sheet, Money Supply and two Fed Speakers.
On the Earnings Calendar, WMT reports before the bell along with 40 other companies throughout the day.
Action Plan
As your planning for the day keep in mind that the SPY, QQQ, and DIA are still below significant resistance levels. As they approach test these key levels, it’s important to stay focused on the price action. No matter how much we want prices to break through resistance, we have to prepare for the possibility they could fail. I think a consolidation in this area would be my personal preference to build energy one way or the other. As you know what we want and what we get are two very different things, and as of now, Mr. Market has not called to ask me what I prefer. Consequently, I have to remain unbiased and have a plan for all possibilities.
Trade Wisely,
Doug
Stuck in the Middle
With the indexes wedged between the significant levels of support and resistance, it reminds me of that old Stealers Wheel song, “Stuck In The Middle With You.” The bears could easily take control and drive us down toward support, or the bulls could quickly mount another attack on resistance depending on which side finds the inspiration. Pre-market earnings or economic new could easily provide that inspiration as could news on trade negotiations or the North Korean leader issuing threats.
So whats a trader to do? Remain flexible and unbiased, stay focused on price action and have a plan ready for either direction.
On the Calendar
On this hump day, we have three potential market-moving reports on the Economic Calendar. At 8:30 AM Eastern the Housing Starts consensus expect April starts to come in at 1.324 million annualized vs. 1.319 million in March. New housing permits according to consensus will decline slightly to 1.350 vs. the 1.379 reading last month. Industrial Production comes out at 9:15 AM and consensus expects a solid 0.6 percent gain with manufacturing growing by 0.3 percent. Forecasters also expect Capacity Utilization of manufacturers to grow to 78.3 percent in April. 10:30 AM brings the EIA Petroleum Status Report is not forwardly forecast but has supported higher oil prices with U.S. reserves slowly declining.
There is a 7:00 Mortgage App. Report, a 10:00 AM Atlanta Fed Business Inflation expectation report and 2-Fed Speaker at 8:30 AM and 6:30 PM, none of which is expected to move the market.
The Earnings Calendar shows 55 companies reporting today with M coming in before the bell and CSCO after the market close.
Action Plan
After the morning gap down yesterday, the bears made a solid attempt to move the market lower but the bulls put in a very strong effort lifting the indexes of the low of the day before the close. Unfortunately, DIA, SPY, and QQQ are currently floating about halfway between significant support and resistance levels so price could easily break in either direction. Futures have been bouncing between a positive and negative this morning as it waits on early earnings reports and housing numbers to find inspiration.
With North Korea kicking sand at the U.S. and ongoing trade negotiations we need to remain flexible because just one news report could influence the direction of the market in about half a heartbeat. Stay focused on price and have a plan for either direction today.
Trade Wisely,
Doug
Healthy Market
In the last couple morning notes, I have suggested a consolidation and or a pullback could begin at any time. Not because I’m bearish but because that’s what a healthy market does. It tests its boundaries and seeks out price support or resistance. As a swing trader, I have learned to embrace consolidations and pullbacks because that’s good entries can be found. However, as a trading coach, I often find that inexperienced traders fear the possibility of pullback rather than seeing it as the natural progress of price action.
It should be no big surprise the emotions of fear and greed are the normal cause. Consider these two simple rules if you’re currently struggling with this problem. 1. Only buy stocks that are at or near price support with a buy signal. Don’t predict or anticipate the buy signal, wait for it to occur before entering. 2. Sell stocks (take profits) that or at or nearing resistance. These simple rules helped me many years ago when I struggled with fear and greed, and if you build them into your trade plans I’m confident they will also help you.
On the Calendar
The Tuesday Economic Calendar gets started today will a Fed Speaker at 8:00 AM Eastern, and we have another one this afternoon 1:10 PM. At 8:30 AM the biggest number of the day Retail Sales expects a moderate 0.3% according to consensus. Also at 8:30 the Empire State Mfg Survey expects a 15.5 vs. the April report of 15.8. Business Inventories at 10:00 AM forecasters see a modest 0.2 percent increase with sales slightly outpacing inventories. Also at 10:00 the Housing Market Index expects home-builder confidence to come in flat at 69 even though home sales and permits are both accelerating. The last of the potential market-moving reports is at 4:00 PM when Treasury Internation Capital reports it’s tracking statistics of financial instruments in and out of the United States. Other than that we have the Redbook and a single bond auction to complete the calendar day.
On the Earnings Calendar, we have the last big of 2nd quarter reports with nearly 250 on today’s docket to keep traders and investors on their toes.
Action Plan
Yesterday marked the 8th day of the current Dow rally (up 68 points) that has seen the index rise more than 1450 points from last Thursday’s low. Although a bullish day the indexes ended the trading slightly under pressure from profit takers leaving behind possible short-term topping candle patterns. Futures are currently pointing to a slightly lower not helped by the sales miss in the Home Depot earnings report early this morning. However, with the nearly 250 companies reporting today and a busy economic calendar topped by Retail sales, anything is possible.
After such a big rally a consolidation of the gains or a pullback to test support would be very healthy for the market. However, let’s not assume the bulls will give up just because the indexes printed some topping patterns. Remember candlestick patterns require follow to confirm them and with new record highs within reach on the QQQ’s and IWM the bulls find inspiration almost anywhere. Let’s keep in mind the deadline for the North America trade agreement is Thursday, and the market could be very sensitive to the news and or the negotiated results. As always stay focused on price action.
Trade Wisely,
Doug
Striking distance of 25,000
In the last 7-days of bullish price action, the Dow has recovered more than 1200 points and is now once again within striking distance of 25,000. The questions now, do the bull have enough energy to punch through or will be bears defend this important psychological level as resistance. The IWM is less than 1-point from making record highs, and the QQQ’s would only have to rise about 3.5 points to do the same. Earnings continue to come in strong, and there are several big reports this week can certainly have the potential of moving the market.
We also have several big economic reports to consider this week and the likelihood of Trade Negotiations news adding in some nervous volatility. So this week brings the bullish possibility of new records and bearish potential that the bears could defend price resistance. With the Futures indicating a gap up open watch for the possibility of whipsaws as we get close to price highs.
On the Calendar
A light day on Monday’s Economic Calendar with only two Fed Speakers and three bond events which are unlikely to move the market. Keep in mind that Retail Sales number are out Tuesday and Wednesday brings Housing Starts and Industrial Production numbers.
The Earnings Calendar for 2nd quarter earnings begins to wind down this week, but Monday and Tuesday are still full days of earnings reports. We have 188 companies reporting results today. Although it’s winding down, there are still some big reports through the week such as DKS, HD, M, CSCO, WMT, and CPB.
Action Plan
If big earnings reports, retail sales numbers, and housing starts were not enough to focus on the market may also have politically generated trade jitters to deal with this week. Speaker Ryan has imposed a Thursday deadline to complete the renegotiation of the North American Free Trader Agreement. The new agreement is largely expected to be market positive, but according to reports completing their work by Thursday’s deadline may not be possible. Also, trade negotiations between the U.S. and China are scheduled to begin this week, which obviously has the potential to create some market shock waves.
Currently, futures suggest a bullish open with the Dow gapping up more than 50 points. On Friday the Dow closed within striking distance of 25,000, but I would not expect this resistance to break easily. After a 7-day winning streak, don’t be surprised to see some profit-taking or price consolidation to begin at any time. The IWM is close to an all-time-high breakout, and the QQQ’s are also nearing price highs. If the bulls have the energy, it is also possible to see some new records set this week as long as the political news doesn’t upset the apple cart with trade jitters. Although I took some profits and hedged some positions last week, I will remain bullish until the price action tells me otherwise. There are a lot of very nice charts to choose from but be careful not chase.
Trade Wisely,
Doug
Don’t make the mistake of Chasing.
After a six-day winning streak, the futures are currently suggesting a moderate gap up at the open today. The market has given us a great week of profits, but we don’t make the mistake of chasing this late into the rally and just ahead of the weekend. As the indexes approach important resistance levels, I’m much more inclined to capture gains rather than add new risk as we enter the weekend.
As a matter of fact, members watch as I took profits yesterday afternoon as the market continued to power higher capturing gains that many would have to work a month to earn in a regular job. The point is don’t allow greed to prevent you from taking a profit and doing your job as a trader. Remember quality trades are much more important than quantity.
On the Calendar
The Friday Economic Calendar gets going at 8:30 AM Eastern with a Fed Speaker and the Import-Export Prices report. Forecasters expect imports to rise 0.5 percent in April while Export prices will grow by 0.3 percent. AT 10:00 AM consensus expects Consumer Sentiment to tick higher in April with a strong reading of 99.0. Last but not least is the Baker-Hughes Rig Count at 1:00 AM which is not expected to move the market.
On the Earnings Calendar, there is a big drop in the number of reports with only 43 companies ready to fess up today. Next Monday and Tuesday are pretty big days with around 400 points between them but after that 2nd earnings season begins to wind down.
Action Plan
Yesterday the Dow and SPY showed considerable strength pushing higher after breaking above the 50-day average just the day before. The QQQ’s powered higher as the IWM nears the all-time highs for the average. As I write this, the futures are suggesting a gap up open which will make the seven straight days of gain is the DIA, SPY, and QQQ. If you’re not already long, I would now caution you not to chase as we are nearing significant levels in the indexes.
It’s been a great week of gains I will be more focused mostly on taking profit as we head into the weekend. The big challenge for the market now is to prove the bulls are strong enough to hold these key levels of support. The bulls are in control and could most certainly push hard enough to close the week with 7-straight days of gains, but it would also not be that surprising to see profit taking ahead of the weekend. Keep in mind gap up opens can easily be seen as an opportunity to sell into strength to capture gains. I wish you all a great day and a fantastic weekend.
Trade Wisely,
Doug
Psychological Boost
Yesterday was a big psychological boost for the market and a great day for the Bulls with all four fo the major indexes finally above their 50-day averages. Now comes the important task for the Bulls to hold on to this key support level. The inflation data in the CPI report this morning could easily serve as the catalyst to inspire the Bulls higher or bring out the bears if the number comes in hotter than expected.
It may be wise to keep an eye on the 10-Treasury for directional clues this morning. Should the 10-year break above the prior high of 3.033 the markets are likely to view that negatively. Currently, the market expects the Fed will raise rates by 25 basis points in June with the possibility of two more this year. A hotter than expected number could easily raise speculation that the Fed will become more aggressive and add a 3rd increase. Of course, I’m rooting for the bulls to win the day but I will have a plan to protect profits and capital should the CPI bring out the bears.
On the Calendar
Today at 8:30 AM Eastern we get two potential market-moving reports, but the CPI may well prove to be the most important report of the week. Consensus expects an April headline monthly gain of 0.3 percent with the core rate gain of only 0.2 percent. The year-on-year rates are both expected to rise by just one-tenth to 2.5 percent overall and 2.2 percent for the core reading. Also at 8:30 AM is the weekly Jobless Claims which consensus expects to come in at 220,000 up 9,000 and just above a 49-year low. Then at 2:00 PM the Treasury Budget according to forecasters will see a surplus of 88.0 billion due to the tax big tax season.
Today marks the last very big day on the Earnings Calendar for this season with 391 companies stepping up to the plate. However, that does not release us from checking reporting dates on the companies we own or are thinking about buying. Next weeks calendar show about 500 companies will report.
Action Plan
Today I think it would be wise to keep an eye on the CPI number that comes out an hour before the market opens at 8:30 AM eastern and has the power to determine the short-term market direction. If the number comes in hotter than expected the 10-year treasury bond could easily rally above 3% which would likely move the market lower. A pop above 3.033 would technically be a new high and could trigger speculation of an additional rate increase this year. If the CPI were to come in cooler than expected, then the market may gain some energy to push higher.
Yesterday was a great day for the market with all four of the major indicators above their 50-day averages. Now the question is, do the bulls have the energy to hold this important level of support? The answer to that question could be in the CPI report. As I write this Futures are suggesting a flat open, but that could easily change based on the large number of earnings this morning and how the inflation data is received. Plan your day accordingly.
Trade Wisely,
Doug
Futures pointing higher.
Now that the US has officially left the Iran nuclear agreement markets around the world are responding higher. Perhaps not the catastrophic event the media spin was alluding to, at least for now. With Futures pointing higher the Dow and SP-500 poised to break the above their 50-day averages at the open. A very welcome site if you happen to be bullish. Getting above this important level is one thing, now it’s up to the bulls to prove they can hold it as support. Something they have been unable to do since early February.
Although inflationary pressures continue to creep up economic data continues to show remarkable strength in the economy. With the majority of earnings reports continuing to come in strong perhaps the bulls will find the energy to hold on this time. As we head into summer, I would not expect the market to reclaim the glory of the 2017 rally, but it would be nice to see it stabilize and settle in above this key support. There is still a lot of resistance above that will have to be dealt with but holding above the 50-day average would be a good start.
On the Calendar
The Economic Calendar on this hump day has two potential market-moving reports. At 8:30 AM Eastern the PPI report expects a 0.3 percent in April for the headline number. Excluding food and energy forecasters see a 0.2 percent increase and 0.3 percent increase if you also exclude trade services. The EIA Petroleum status report has seen a short-term trend of declining supplies which in turn has helped support rising oil prices. There is no forward forecast of oil supplies, so it’s always a true market surprise. The remaining events on the calendar include 7:00 AM Mortgage Applications, 10:00 AM Wholesale Trade, and two 1:00 PM Bond auctions, none of which is expected to move the market.
On the Earnings Calendar, I show 371 companies stepping up to report quarterly results.
Action Plan
Yesterday the market traded in a tight range as it seemingly waited for the Presidents decision on the Iran Nuclear deal. Oddly enough after we learned the US would be pulling out of the deal, there was still a very little reaction as the market seemed content to rest another day. The DIA and SPY both closed the day just below their 50-day averages while the QQQ’s and the IWM found the energy to hold above as the market seemed to be struggling to make a directional decision.
This morning the Dow Futures are suggesting a substantial gap up of more than 100 points with both Asian and European markets trading bullishly. It would seem the US leaving Iran agreement is of little concern to the markets at this point with the bulls pushing for higher prints. If the futures remain strong through the rest of the morning, the DIA and SPY look to break the resistance of their 50-day averages. The question now is can the bulls hold this important support which they have not been able to do since early February. Here to hoping they can! Remember with so many earnings reports still to come that fast price and volatility are still possible.
Trade Wisely,
Doug
Considerable uncertainty.
Overall yesterday was a win for the bulls following though from the big rally last Friday. However, with the DIA and SPY leaving behind doji patterns just below the 50-day average, they left us considerable uncertainty as well. Although the Tech’s and small caps closed strong the question on everyone’s mind, will that be enough to fend off a bear attack?
Currently, the futures are pointing to a lower open, but with political news pending and a huge number of earnings reports, anything is possible. I think traders should exercise a little caution this morning until some better price action clues appear.
On the Calendar
There is only one market-moving report on today’s Economic Calendar. There was a Fed Speaker at 3:15 AM, the NFIB Small Business Optimism at 6:00 AM, Redbook at 8:55 AM and two bond events at 11:30 AM & 1:00 PM. The potential market-moving JOLTS (job openings) expects to see a slight increase in March to 6.100 million vs. February’s 6.052.
We have another big day on the Earnings Calendar with 420 companies stepping up to report today. Make sure you’re checking your holdings against expected earnings reports.
Action Plan
We begin Tuesday with a little uncertainty, after printing doji patterns below the 50-day average on the DIA and SPY. To make it a bit more confusing the QQQ and IWM managed close bullish and above their respective 50-day averages. Struggling at this important resistance is not that big of a surprise, but we certainly but it now becomes imperative for the bulls to step up and fend off a possible bear attack. A day of rest would be perfectly acceptable, but we don’t want to see failure patterns on the DIA and SPY at the end of the day.
Currently, the futures are pointing to a lower open of more than 50 Dow points however with so many earnings reports this morning anything is possible. I would suggest a little caution this morning as the bulls and bears battle for control. If holding some unrealized gains make sure you have a plans to protect them because failure here could easily embolden the bears to seek new market lows. Let’s go bulls it’s time to step up!
Trade wisely,
Doug
Not out of the woods just yet.
The bulls went to work on Friday providing very nice relief rally, but the markets are not out of the woods just yet. The big move in AAPL fueled by the huge share purchase by Waren Buffett helped the QQQ’s break above it’s 50-day moving average. However, all four of the major indexes are still in technical downtrends with significant price resistance levels above. Although the Futures are pointing to a bullish open, keep in mind that after such a big 2-day rally some profit taking would not be out of the question.
The market has a lot to chew on this week with trade negotiations, nuclear deals, North Korea and about 1400 earnings reports. Price volatility is likely to remain high, and big whipsaws or reversals are not out of the realm of possibility amidst the new spin cycle. I’m rooting for the bulls to win this battle but I will also have a plan if bears regain control and everything starts moving south.
On the Calendar
A quiet day on Economic Calendar for a change. There are three bond events, the TD Ameritrade IMX, Consumer Credit and three Fed speakers none of which are typically market-moving.
On the Earnings Calendar, there are 219 companies reporting quarterly results. Today begins the last big week of this earnings season with around 1400 companies reporting.
Action Plan
Friday’s big beautiful bullish follow through was a very welcome site and was quite broad-based. The tech sector turned out the be the biggest winner after the news that Warren Buffett when on another spending spree in AAPL shares. That boost propelled the stock price to new record highs and due to its heavy weighting in QQQ pushed the ETF’s price above the 50-day average.
Unfortunately, the DIA and SPY remain under the 50-day average which means the bulls have a lot more work ahead of them. Keep in mind the indexes still have a lot of overhead price resistance to deal with, and all four indexes are still in down trending patterns. I wouldn’t expect the bears to give up easily and with the Dow, over 700 points off the low printed on Thursday, some profit taking is not out of the question. The good news is that currently, the Dow Futures are suggesting a positive open. The bad news is that the Dow will have to rally more than 230 points to test the 50-day averages and more than 550 points to break the lower high resistance. Possible yes, but a tall order when you consider China Trade negotiations, a North Korean talks, and the Iranian Nuclear deal that could easily present stumbling blocks.
Trade Wisely,
Doug
Once again the small caps manage to set new record highs. However, the DIA, SPY and QQQ’s remain stuck between significant levels of support and resistance. Currently, the Bulls and Bears seem equally matched and seem to have slipped into a tight range consolidation at least for the short-term.
