All about the Mid-Term

Everywhere I look I see another talking head trying to predict the outcome of the mid-term election.  To be honest, that’s far easier to do that than trying to predict how the market will react to the results!  What I can say with 100% certainty is that no one knows what that reaction will be and trying to trade it is straight up gambling.  As traders, we all gamble from time to time but let’s be honest with ourselves and have our eyes wide open if you choose to do so today.

It’s highly likely the market will gap Wednesday morning substantially.  Which means all trades held through the close today are at a higher than normal risk.  If you do decide to add risk today, I suggest you keep the positions small to minimize the losses if your guess of the market reaction is incorrect.  Also, keep in mind that you don’t have to play the guessing game!  There is no shame in standing aside protecting your capital and waiting to trade the reaction when you have a better edge.

On the Calendar

On the Earnings Calendar, we have more than 350 companies reporting today.  Keep checking and stay focused on the number of reports grows even more through Thursday.

Action Plan

Asian markets caught a bit of bounce last night but by the close finished mixed.  European markets, however, are all slightly bearish this morning and that sentiment seems to have translated directly to the US Futures market.  Although futures are currently suggesting a modestly lower open, that could easily change due to all the earnings reports.  I would normally expect a considerable amount of volatility but with the market waiting on mid-term election results price action may be choppy and subdued.

While many are trying to predict the election outcome its impossible to know how the market will react.  However, react it will, and likely with a big gap up or down on Wednesday morning increasing the risk of every position we hold.  Carefully consider that risk if you plan to enter new positions today or carry any positions into the close today.  As a result, it’s very unlikely that I will be trading today except for the possible quick intraday trade to take advantage of volatility and stave off the boredom of an election day market.

Trade Wisely,

Doug

Brave Face before the mid-term.

This morning the US Futures are trying to put on a brave face before the mid-term election indicating a bullish open.  While the water may seem calm on the surface, there is likely significant turbulence lurking just below.  Futures were lower most of the night so don’t rule out the possible test of the overnight lows during the day.

Combine trade war rhetoric, mid-term election, and nearly 1500 earnings reports this week, and the stage is set for fast price action and high volatility.  After the morning pop wait to see if actual buyers step in to support the gap or if we have a replay of Friday’s pop and drop.  As the old saying goes, patience is a virtue. In the current market condition, patience is also a critical skill every trader should endeavor to master.  Wait for your edge to return!   Remember Santa is coming to town, and his bullish presence historically begins mid to late November.

On the Calendar

On the Earnings Calendar, we have 270 companies reporting earnings today with nearly 1500 by the end of the week.  Make sure your checking earnings dates against all current and proposed positions.

Acton Plan

We have an interesting market setup this morning.  Asian markets were sharply lower across the board overnight with morning trade talk rhetoric coming from the leader.  Across the pond, European markets are currently modestly higher across the board.  US Futures that were pointing to losses most of the night are now pointing to a slightly bullish open but with the so many companies reporting earnings anything is possible.  Although it’s nice to see a little bullishness this morning, I would not rule out the possibility of testing the overnight futures low sometime during the day as high volatility continues to challenge traders.

With the mid-term polls opening up tomorrow it is also possible that after the morning rush the price action could easily stall as we wait for election results.  The market is very sensitive to any trade negotiation news, and we should expect significant price swings on good or bad news reports. I would not rule out another market pullback to test the October lows and high volatility to continue for the next couple of weeks.  However, Santa is coming to town, and the recent pullback could open the door to nice rally later this month and into December.  Be patient, stay focused and protect your capital until you have an edge.

Trade Wisely,

Doug

Bulls Leaping Higher

Apple disappointed investors, but news that the US and China are talking positively about inking a trade deal has the Bulls leaping higher for today’s open.  As AAPL slides about south 5%, the US futures are indicated to open nearly 300 points higher.  Traders still holding short positions at the open will feel the pain of a short squeeze this morning.

At the open today, the Dow will have recovered about 1400 points in just four days.  Heading into the weekend and with the mid-term elections just around the corner be careful not chase.  Although a trade deal between the US and China could be a game changer for the market by the end of the year, it does not rule out the possibility of profit taking by the end of the day.  With about 1500 companies reporting next week and a lot of technical chart damage repair volatility is likely to remain very high so plan your risk into the weekend carefully.

On the Calendar

We get a little break on the Friday Earnings Calendar with just over 100 companies reporting today.  Next week more than 1500 companies are expected to report.  Notables for today: AAPL, ABBV, AIV, AMH, ANET, APPN, ATHN, AXL, BABA, BLDR, BPL, BRKR, CBOE, CBS, CC, CCJ, CERS, CHEF, CNK, CORT, CRC, CRUS, CVX, DEI, DOC, DUK, EAF, ED, EEP, ENB, EOG, ES, EXEL, EXTR, FLR, FTNT, GPRO, HR, HRC, HST, IMGN, IPHI, ITT, KHC, LADR, LHO, LNC, LYV, MDRX, MELI, MET, MSGN, MSI, MTZ, NFG, NPTN, NWL, OEC, OLED, PBA, PBYI, PE, PEB, PK, PODD, RLGY, RP, SBUX, SEDG, SEP, SHAK, SHLX, SKT, SM, SRCL, SRG, STAG, STX, SYMC, TDC, TDOC, TDS, TEX, TNDM, TRMB, TRTN, TSRO, UNIT, VG, VIAV, VICI, VST, WIFI, WLTW, WPC, WTW, WU, X, XOM

Action Plan

With the news that the US and China are getting closer to inking a trade, the market is leaping higher this morning.  That news came at the perfect time as AAPL disappointed investors and is indicated more than 5% lower at the open.  Asian and European markets were decidedly bullish overnight and the Dow Futures currently suggesting a gap up nearly 300 points.

A trade deal with China could be a bullish game changer for the end of this year.  There is certainly a lot of technical damage in the charts to recover from, but it is possible a true V-bottom pattern could occur.  Remember we still have the mid-term elections next week and volatility is likely to remain very high with about 1500 companies scheduled to report earnings next week.  The Dow will have recovered about 1400 points in 4 days at the open, don’t be surprised if we see some profit taking ahead of the weekend.

Trade Wisely,

Doug

Volatility Continues

Markets are once again gaping higher this morning as this wild ride of volatility continues.  With nearly 450 companies reporting earnings today and a busy economic calendar, anything is possible.  Price resistance did its job yesterday rejecting the days high.  This mornings gap brings the price right back up to those same price resistance levels.  I intend to very cautious this morning and will watch price action closely to see if this gap is actually going to be supported by buyers.

Keep in mind AAPL reports this afternoon and we have the Employment Situation report before the open on Friday even more volatility risk for those holding positions into today’s close.  Remember mid-term elections are next week, and the trade issues with China continue.  Think about that as you plan your risk heading into the weekend.

On the Calendar

We have a huge day on the Earnings Calendar with nearly 45 companies reporting.  Some of the notable earnings for today are: AGIO, AIG, ALL, AMAG, AMCX, AME, AMGP, AMRN, APA, AR, ARES, AROC, ATH, AWK, BCE, BID, BLL, BMCH, BSIG, CBRE, CF, CHD, CI, CJ, CLI, CMP, CNO, CNQ, CNSL, D, DM, DNOW, DWDP, EPZM, ESRT, ESRX, FISV, FND, FRAC, GEL, GLOG, GLPI, GNRC, GOV, HBI, HCC, HGV, HPP, IDXX, IIVI, INAP, INGR, IT, JHG, KRG, KW, LITE, MAA, MAC, MD, MDU, MGP, MMP, MOH, MPC, MPLX, MPW, MRC, MSCI, MT, MTDR, NBL, NE, NFX, NI, NNN, NTCT, NXPI, NYT, O, OMF, OSK, PAH, PBH, PBI, PENN, PGTI, PH, PKI, PPC, PPL, PWR, QRVO, RDS.A, RDUS, RGLD, RPT, RYN, SEE, SFM, SHPG, SNDR, SPOT, SSNC, STAY, STOR, SU, TEVA, THS, TPX, TRP, TS, TVPT, UFS, USCR, VECO, W, WCC, WMB, WPX, WTI, WYND, XPO, ZTS.

Action Plan

Asian markets closed mixed overnight, but European markets are currently bullish across the board.  While I love the bullish enthusiasm in the US Futures this morning, I’m want to extra cautious about the possibility of a pop and drop today.  AAPL reports this afternoon, and we have the Employment Situation number coming in Friday morning before the open.  If that’s not enough to give you a little pause, then answer this question.  What’s changed?  The trade war tensions are still there; the mid-term elections are still on the horizon, and earnings reports have been far from stellar.

Please understand I want the market to go up, but I will only believe it when I actual buyers are supporting the gap after the open.  Until then I will remain cautious remembering that volatility is still very high and with more than 400 earnings reports that anything is possible.  Keep a close eye on resistance levels as we move up to test.

Trade Wisely,

Doug

Possible Follow-through?

Bullishness in the Asian and European market has the US Futures suggesting the first possible follow-through rally in nearly a month!  Certainly exciting to see but as the indexes challenge price resistance levels, we can’t rule out the possibility of profit-taking.  As a result, traders will need to say on their toes focused on price action and aware of the current market volatility.

As earnings continue to roll out this morning, keep in mind that anything is possible.  We have recently experienced the pain caused by chasing into a gap up open that ultimately sells off the rest of day.  Please understand I’m not hoping for or suggesting that will occur.  I’m merely pointing out the possibility and that traders need to remain thoughtful of the risk and prepared for anything this volatile market tosses our way.  Have a plan and trade with a stop!

On the Calendar

On the Earnings Calendar, we have over 250 companies reporting earnings today.  Among the most notable today: ACGL, ACOR, ADP, AEE, AMGN, ANTM, APC, APO, APTV, BAX, BG, BGS, BHE, BIDU, BJRI, BXP, CAKE, CDW, CG, CHRW, CIM, CLVS, CLX, CONE, CRTO, CVE, CXO, DDD, EA, EBAY, EIX, EL, EPD, ESIO, ETR, EXAS, EXC, EXR, FB, FEYE, FLT, GM, GRMN, H, HCLP, HCP, HES, HFC, HLF, ICE, ICPT, IGT, INN, IQ, K, MDR, MGM, MXIM, MXL, NBR, NCR, NTRI, NUVA, OI, OKE, OMI, ORBC, PAYC, PBF, PDM, PSA, QNST, RDC, RDN, RPAI, RRR, RXN, SC, SEND, SF, SFLY, SITE, SNY, SPR, SPWR, SSW, TAP, TEL, TMHC, TMUS, TTMI, VOYA, VRSK, WEC, WES, WLL, WNC, YUM, YUMC, ZEN

Action Plan

Could we actually get two bullish days in the row?  Big gains in Asian markets overnight with European decidedly bullish this morning has US Futures currently suggesting a gap higher of more than 100 points.  Unfortunately, with such a big gap, we have to be on guard for the possibility of a pop and drop as the indexes challenge the downtrend and price resistance levels.  Consequently, be careful chasing into the morning gap until we see real buying supporting the new level.

Of course with more than 250 companies reporting earnings a lot could change by the open.  Continue to plan for high volatility, fast price action, and whipsaws.  As the indexes and individual stocks test, upper resistance levels remember to take some profits to the bank.

Trade Wisely,

Doug

Silver Lining

Without a doubt, yesterday was an ugly ride, but it also revealed a possible silver lining.  Where was the silver lining?  In the last 15 minutes of the day, we experienced a huge bounce that can only occur when the big institutions finally step in to snap up the bargains and defend the lows.  We still need proof of that with a follow-through rally today.  Make no mistake, if this is a short-term bottom the price action will still be very challenging to trade.

Asian and European had mixed results during the night, but the US Futures are currently pointing to higher open that has the potential of recovering some key support levels.  Fast price action, whipsaws and the possibility of overnight reversals will continue to make the waters very difficult to navigate.  With nearly 1000 companies yet to report this week anything is possible so prepare for the bumpy ride to continue!

On the Calendar

Tuesday begins with the CoreLogic Case-Shiller report at 10:00 AM and expecting at 0.1 percent monthly gain and the Year-on-Year rate at 6.0 percent.  Then the Consumer Confidence report is at 10:00 AM where consensus expects the October reading to decline slightly to 136.3.  After that we have two Bond Auctions at 11:30 AM, then the Farm Prices report at 3:00 PM.

On the Earnings Calendar, more than 280 companies are expected to report today.  Here are some the most notable: ACCO, AER, AET, AGCO, AGN, AKAM, ALSN, AMKR, AMT, AN, AOS, APTI, ARE, ARNC, ARRY, AVB, AWI, AXGN, BHGE, BKI, BLKB, BP, BRX, BTU, CGNX, CHGG, CLR, CMI, CNX, CTSH, EAT, ECL, EGHT, EHC, EPR, ERJ, ESV, ETN, EXP, FCAU, FET, FIS, FLIR, FTSI, GE, GPN, GWR, HCA, HMC, HUN, I, IDTI, INCY, INST, IPGP, KBR, KEM, KLAC, KO, LL, LYB, MA, MAS, MDLZ, MSM, NEO, OLN, PEG, PFE, QGEN, QTS, RIG, RMBS, SABR, SCI, SHOO, SNE, ST, TCO, TKR, TPR, TREX, TXRH, UAA, UDR, VMC, VNO, VNOM, VNTR, VSH, WAB, WCG, WCN, WDR, WELL, WH, WING, WLH, XYL

Acton Plan

I mentioned yesterday that I would not be surprised to see another leg lower but yesterdays price action was downright nasty!  However, the big swoon that was rallied strongly in the last 15 minutes of the day may be exactly the thing we needed.  The only way to have such a massive bounce at the end of the day is with institutions stepping up in a big way to defend the lows.  If and that is big IF, we can get a follow-through today, we may have finally put in a short-term bottom.

Expect very high volatility to continue with fast price action.  Traders should expect to be challenged by large morning gaps, intraday whipsaw and the possibility of overnight reversals.  How companies report will be critical.  Stay buckled up because the wild ride is far from over.

Trade Wisely,

Doug

FANG has a Cavity

It would appear that after the very disappointing earnings results from AMZN and GOOG that the so-called FANG has a cavity.  Indeed a very big cavity that spread its pain all around the world.   Both, Asian and European market are both lower this morning.  US Futures indicate that yesterday’s 400 point Dow rally will be completely wiped out this morning with an ugly gap down open.

As painful as this might be for you this morning I want to leave you with a positive thought as we head into the weekend.  Good stocks are falling to fire-sale prices which mean there will be some amazing bargains when this is over.  For most traders, the best course of action in such high volatile times is to stand aside and protect your capital.  If you try to fight it, your money will disappear.  Better days are on the way, just be patient and wait for your edge to return.

On the Calendar

We have a light day on the Friday Economic Calendar, but it begins with the heavyweight market-moving GDP 8:30 AM report.  The consensus estimate expects a 3.3 percent annualized vs. 4.3 percent in the second quarter. The GDP price index is seen declining to 2.0 percent vs. the 3.0 last reading.  Consumer Sentiment is expected to show confidence to remains very strong with a reading of 99.0 in October.  We wrap up the calendar week with the Baker-Hughes Rig Count at 1:00 PM.

On the Earnings Calendar, there are 67 companies expected to report results.

Action Plan

With the hugely disappointing results in the big tech earnings after the bell futures are pointing to a very nasty gap down this morning.  AMZN is currently indicated to lose more than $170 a share from yesterdays close with GOOG close behind dropping nearly $70 a share.  It would seem FANG has a huge and painful cavity!

Yesterday’s 400 point Dow rally looks to be completely wiped out at the open today.  The big question now on the mind of the market; Will Thursday’s low hold as support? If not the next strong level of support is about 600 points lower in the Dow and 75 points lower in the SP-500.  The pain has spread around the world with Asian markets closing sharply lower and European markets all in the red this morning.  With a 400 point overnight reversal, expect very fast price action and the possibility of panic selling if the supports fail.  Better days are coming, and with stocks dropping to fire sale prices there will be a great opportunity when this is over.  Have a great weekend everyone.

Trade Wisely,

Doug

Capitulation

The news-driven selloff seems to have finally reached a capitulation point yesterday. Sadly those that sold yesterday afternoon had also to suffer the indignity of seeing the futures bounce strongly almost immediately after the closing bell. Although we should expect volatility to remain very high with very fast and challenging price action, I think we have reached the point where institutions and value buyers will begin to support current prices.

Of course, earnings are the big unknown and if we see some of the big techs disappoint the market, the bears could easily maintain control. With the VIX closing above a 25 handle, any major disappointment in earnings could evolve from fear into outright panic. Consequently, the price action will most likely be very challenging and not a place for those faint of heart. Extreme intraday whips are possible so plan your risk very carefully.

On the Calendar

We begin Wednesday with three potential market-moving reports at 8:30 AM Eastern. First, Durable Goods Orders expects September to decline by 1.5 percent after surging 4.4 percent in August. International Trade in Goods sees the deficit narrowing to 74.7 billion vs. 75.5 billion in August. The Weekly Jobless Claims are expected to remain near historic lows but rising slightly to 212,000 this week. After that Retail Inventories and Wholesale Inventories @ 8:30 AM, Pending Home Sales Index @ 10:00 AM, Natural Gas Report @ 10:30 AM, Kansas City Fed Manufacturing Index, and 2-Bond Announcements @ 11:00 AM, a Fed Speaker @ 12:15 PM, a Bond Auction at 1:00 PM, the Fed Balance Sheet and Money Supply at 4:30 PM, and a Fed Speaker to finally close the calendar day at 7:00 PM.

There are far too many notable companies to list this morning. We have 339 companies reporting today on the Economic Calendar including several big techs that typically move the market. Make double sure your checking current holdings for earnings.

Action Plan

Yesterday I mentioned with T2122 indicating an oversold condition that I was favoring a bounce for Wednesday. However, as the news rolled out about explosive devices sent through the mail, the market has other plans. It’s unfortunate that many traders were likely squeezed out and then saw the futures almost immediately rebound after the bell.

Looking over the internal damage, I believe we have finally reached that critical capitulation point where we will see institutional and value buyers begin to support current prices. Volatility will likely remain very high and with more than 300 companies reporting today very fast price action will make it very challenging. Keep in mind that if this is the market low at some time in the future, it is very likely to be retested. Of course, if some of the big tech names reporting disappoint today, the bears could easily push on lower. Plan your risk very carefully and the weekend approaches.

Trade Wisely,

Doug

Whiplash

Yesterday’s wild price fluctuations may have left many traders with a nasty case of whiplash.  Unfortunately, it looks like the volatility is here to stay and with more than 200 companies reporting earnings today and more than 300 tomorrow, anything is possible.

Looking at the market internally I believe, and short-term oversold condition currently exists.  However, with the likelihood of big morning gaps and nasty intraday whipsaws, profiting from this condition will be a very challenging and high-risk endeavor.  Just because the market is open is not a good reason to put capital at risk.  Only trade when you believe you have an edge and feel you can handle the emotional effects of high volatility.  Remember cash is a position and there is no shame in protecting your capital in times like this.

On the Calendar

The Economic starts early today with the MBA Mortgage Applications at 7:00 AM Eastern.  The Housing Price Index comes out @ 9:00 AM and then the PMI Composite Flash at 9:45 AM.   The New Home Sales report expects to hold steady with an annualized rate of 625,000 in September vs. 629,000 in August and is the most likely report to move the market today.  At 10:30 AM is the Petroleum Status Report which is also potentially market-moving however not forecast by consensus.  After that, we have a Fed Speaker @ 11:30 AM, a bond auction @ 11:30 AM, a Fed Speaker @ 12:30 PM, a bond auction @ 1:00 PM, another Fed Speaker, and the Beige Book @ 2:00 PM, finally closing the calendar day at 7:00 PM with you guessed it; another Fed Speaker.

On the Earnings Calendar, we have a very busy day with 227 companies stepping up to report.  Some of the notables are: ALXN, AMP, APH, BKU, BPOP, BSX, BXMT, CB, CHKP, CNI, COF, CSL, DTE, EQR, EW, FCX, GD, GRA, HA, HIW, HLT, IR, IRBT, ITW, JNPR, LH, MANH, NAVI, NDAQ, NSC, NYCB, OC, PB, QSR, RES, RHI, ROIC, ROL, RRC, SEIC, SIX, SMPL, STL, STM, T, TER, TMO, TPH, TRVG, TSS, TUP, TXN, UPS, VAR, WRB

Action Plan

After sinking more than the 500 points from Monday’s low, the Dow bulls managed to recover a good deal of its losses closing down just 125 points on the day.  All four of the major indexes made substantial recoveries, but unfortunately, some of those gains will be swept aside with the futures currently suggesting a gap down of more than 100 Dow points at the open.  As I mentioned in yesterdays note, expect lots of volatility, and so far the had delivered exactly that!

With more than 200 companies reporting earnings today and VIX holding above a 20 handle we can expect the wild price action to continue.  With daily triple-digit market gaps and large intraday whipsaws maintaining an edge for the swing trader is near to impossible.  If you do trade, I highly suggest smaller than normal positions to help reduce risk.  I also think it’s wise to take profits quickly because a market gap and instantly turn winners into losers.  Internally the market appears to be in a short-term oversold condition, but as we experienced yesterday, earnings can easily keep the bears engaged.

Trade Wisely,

Doug