Insipid
If you listen to the financial news, they blame yesterdays 300 point Dow selloff on Trade War jitters. Okay, if that’s the case what changed midday to cause the rally that recovered the entire selloff to close the day up 5 points? If I were to define the price action in a single word, it would be Insipid, (no vigor). The bulls are certainly lacking vigor unable to find buyers even on strong earnings reports. And although we are in a current downtrend, the bears also seem lacking conviction allowing intraday whipsaws and reversals to occur almost daily.
The fact is after the unprecedented run up last year that overpriced the market this is a very normal process of trying to renegotiate prices. Admittedly it’s extremely frustrating and very challenging to trade. With the DIA and the SPY holding on to their 200-day averages yesterday I would love to say it now over but honestly I don’t think that true. Although we may get a relief rally, I think the chances of difficult price action through the summer months is a high probability. The good news is money can still be made with good technical analysis and selective stock picking. The big intraday swings will eventually diminish, and the technical analysts will rule supreme. There may be fewer trending stocks to choose from, but the quality of a trade is always more important than quantity.
On the Calendar
Only one market-moving report and a parade of Fed Speakers for this Friday’s Economic Calendar. Before the bell at 8:30 AM Eastern we will get the very important Employment Situation report. Consensus expects the April nonfarm payrolls grew by 191,000 in April with the unemployment rate slipping 1-tenth to 4.0 percent. Average hourly earnings will tick up by only 0.2 percent with the yearly rate holding steady at 2.7 percent. The forecast also expects manufacturing payrolls to post solid growth of 15,000. The workweek is seen unchanged at 34.5 hours with the labor participation rate coming in flat at 62.9. The oil rig count is at 1:00 PM and there are 7 Fed member speaking engagements throughout the day to close the calendar week.
On the Earnings Calendar, there are 95 companies expected to fess up to their results today. Next will is another huge week of earnings with around 1400 expected reports to keep us on our toes.
Action Plan
No matter how if you were a bull or bear yesterday was frustrating because the market does not seem capable of holding on to a direction for an entire day. The Dow dropped 300 points in the morning and then rallied about the same in the afternoon. After all that movement it ended the day flat. A frustrating whipsaw to be certain.
The good news – The DIA and the SPY ultimately held the 200-day-average and printed a Hammer Candle Pattern. The bad news – A Hammer Candle Pattern requires follow-through, and currently, the futures are pointing to gap down open. Couple that with the fact the bulls have not been able to find buyers even on great earnings reports it tough to believe in them enough at this point to toss caution to the wind and buy this low. With the weekend coming and the news whipping up trade war fears it might be wise to exercise some caution.
Trade Wisely,
Doug
Rising Concern
Good earnings reports, no interest rate increase and the bulls don’t seem to care. I don’t know about you that is becoming a serious concern to me. With the DIA and the SPY once again dipping toward the 200-day-average I’m becoming increasingly concerned that bears could seek a retest of the April lows or possibly lower. With the Futures pointing to a flat open and the bulls seemingly unable to respond to good reports traders should be on high alert. A failure below the 200-day-average could embolden the bears to launch a full assault to find the next level of support which on the Dow could be more than 500 points lower.
I don’t intend to sound all bearish because it is still very possible for the bulls to launch a defense but they have better get to it pretty darn soon. As always stay focused on price action for clues. It’s certainly okay to hope for the best as long as you have a plan to protect your capital form the worst. Personally, I think the market is near a critical decision point that could define the course of the next several months of trading. Be prepared.
On the Calendar
We have a busy day on the Economic Calendar with five potential market-moving reports, three of which come out together at 8:30 AM Eastern. According to consensus, the International Trade deficit is expected to decline to $49.9 billion in March vs. the February print of $57.6 billion. The weekly Jobless Claims expect labor demand to remain strong but see claims increasing to 224K this week. Productivity and Costs report expects to show a modest increase in first quarter production of 0.9% annualized but also see labor costs increasing 3.0%.
At 10:00 AM Factory Orders expects March durable goods orders to increase 1.3 while capital goods orders point to a slowing in business investment. Also at 10:00 AM ISM Non-Mfg Index, according to consensus will hold a very strong rate of 58.4 in April vs. the March reading at 58.8 as delivery times have been increasing due to capacity constraints and labor costs. The remaining reports on the calendar, Consumer Comfort, Natural Gas, Fed Balance Sheet, Money Supply and Bond Announcement are unlikely to move the market today.
Today is also a big day on the Earnings Calendar with more than 400 companies expected to report. Stay vigilant and keep checking reporting dates of companies you hold and have a plan to avoid painful earnings surprises.
Action Plan
In my 29 years of market experience, yesterday’s FOMC market reaction to unchanged interest rates ranks among the most boring. When the bears did finally step in it was a slow and grinding decline with the DIA and SPY dipping toward a test Tuesday’s low. The QQQ dipped but held more than 50% of Tuesday’s rally while the IWM pushed upward closing above its 50-Day-Average. Overnight Futures were negative but currently are suggesting a flat open.
It’s interesting to note and concerning as earnings continue to come better than expected with no interest increases from the FOMC that the bulls have been unable to gain any traction. The 200-Day-Average fast approaching once again the bulls had better get it together quickly, or we should expect the bears to make a run for the April lows and perhaps lower. As of now, the VIX is not showing a sharp rise in fear but keep a close eye on it because a failure below the 200-day could easily open a floodgate of bearish sentiment.
Trade Wisely,
Doug
The Humbling Market
The market has a way of humbling us all. Yesterday I suggested we would likely see a big gap up or a big gap down as a result of AAPL earnings. AAPL produced great earnings, sales, guidance and huge stock repurchase program after the bell yesterday. The stock currently is gaping up 4% in the premarket and all-though the Dow Futures are pointing to a gap up open it’s not what I would call a big gap. Although I still think I was right to be cautious ahead of such big focused event, it wrong of me to try and predict how the market would react. A lesson that has repeatedly humbled me over the last 28 years of trading.
As always it’s the big institutions with their trillions of dollars that will decide the direction of a stock and the overall market. Our job as retail traders is to identify the clues they leave behind in price action and follow their lead rather than trying to predict the future. It’s far less stressful and much easier to build consistency into your trading when we remain humble and simply follow price action.
On the Calendar
Today’s Economic Calander have three potential market-moving reports. First, the ADP Employment report at 8:15 AM Eastern is estimating the economy created 191,000 new jobs in April. The unforecast Petroleum Statis report at 10:30 AM has shown the US supplies declining of late helping to support oil prices. Then at 2:00 PM is the biggest event of the day occurs when the FOMC releases their decision on interest rates. Other than that we have a couple of reports and three bond events all of which are not expected to move the market.
Another big day on the Earnings Calendar with nearly 350 companies reporting results. Stay on your toes.
Action Plan
AAPL does it once again releasing considerable pressure in the tech sector topping estimates and selling more than 52 million iPhone’s last quarter. They also announce an additional 100 billion in stock repurchases to put a cherry on top for investors. The question is, with this giant weight lifted, can the tech sector stocks get moving in response to so many strong earnings reports? Only time will tell.
Now we move on to the FOMC rate decision at 2:00 PM. After the morning rush, it’s pretty normal for the market to become slow and choppy as we wait for their announcement. Expect extremely fast price action on the release of the decision which often delivers several whipsaws before finally establishing a direction. Currently, the Fed Funds Futures place about a 95% chance of a rate increase of 25 basis points today. The big question is will the statement become move toward the hawkish side now that the Economic targets established by the FOMC have been achieved?
Trade Wisely,
Doug
AAPL in focus.
There is an old saying,” with great power comes great responsibility.” Not many companies ever wield the power that the tech behemoth AAPL. So with the overall market struggling to find its footing, I guess it’s fitting that the AAPL earnings report could be responsible for reversing or confirming market direction. Suppliers of this tech giant have raised speculation that orders of chips and displays have declined by as much as 50% begging the question, will AAPL miss earnings estimates? If the company reports better than expected, expect a gap up Wednesday morning, however, and AAPL miss will likely produce a sizable gap down.
As soon the fireworks over the AAPL report have subsided the market will turn its focus the FOMC announcement at 2:00 PM Eastern time on Wednesday. With such big hitters coming up to bat I would not be at surprised to see choppy price action today as the market waits holding its breath and hoping for a positive outcome. Get ready for a wild ride.
On the Calendar
The FOMC begins its 2-day meeting on this first day of May Economic Calendar. The PMI Manufacturing Index, out at 9:45 AM, expects to come in unchanged at 56.5 in April but continues at multi-year highs. The biggest number or the day, ISM Mfg Index, come out at 10:00 AM and according to consensus will decline slightly but remains strong in April coming in at 58.6 vs. the 59.3 March reading. Also at 10:00 AM is the Construction Spending report which forecasters expect to grow by 0.5 percent in March. A 4-week Bill Action will close out the calendar day at 11:30 AM.
Another big day of earnings reports with just over 260 companies on the calendar. Stay on your toes and keep checking reporting dates for the companies you hold or those you’re about to purchase because there are more than 800 reports yet to come this week.
Action Plan
An unpleasant day on Monday as the market served up a classic Pump and Dump leaving behind a lot of bearish candle patterns. The DIA, the SPY, printed Bearish Engulfing patterns that are unfortunately showing a failure at the 50-day SMA. The QQQ followed through to the downside confirming Friday’s failure of the 50-day SMA. The IWM joined the party yesterday with a bearish engulfing pattern breaking its 50-day average after working so hard to hold it last week. Earnings reports by-in-large continue to come in strong, but sadly profit takers continue to overpower buyers reacting to the good results.
Although there are over 260 companies reporting today all eyes seem to focus on just one, AAPL. The tech giant is weighed heavily in not only the QQQ but also the DIA and SPY. AAPL reports after the bell today and could reverse or confirm the current market downtrend. It would be wise to plan for a market gap up or down Wednesday morning. If that were not enough drama, the market must turn its attention to the FOMC announcement at 2:00 PM Eastern time. Buckle up this could be a very bumpy ride.
Trade Wisely,
Doug
Strong Earnings performance.
A slight decline in rates coupled with strong earnings performance gave the bulls want they needed to recover a good deal of the Tuesday sell-off. While the relief rally produces some very nice profits for us, we must recognize the significant resistance that lies above on the DIA, SPY, and QQQ. With the GDP expected to show a decline in the 1st quarter the bull may find it difficult to drive higher ahead of the weekend. Even if the numbers come in better than expected, it would not be out of the question to see some profit-taking after the 2-day Dow rally of nearly 500 points. Also, keep in mind there are 100 companies reporting earnings today, so continue to expect fast price action and watch for the possibility of reversal with such strong resistance above.
On the Calendar
We get things going on the calendar with the very important GDP report at 8:30 AM Eastern. According to forecasters, the GDP should come in at 2.0 for the first estimate of the 1st quarter vs. 2.9 in the 4th quarter. Consumer spending is expected to sharply decline to a 1.1% rate vs. the very strong 4.0% from the 4th quarter. The GDP price index is expected slightly higher at 2.4%. Also at 8:30 AM, the Employment Cost Index, is also expected to tick higher to 0.7% for the 4th quarter reading vs. 0.6% in the 3rd quarter of last year. Consumer Spending comes out at 10:00 AM expects a decline to 98.0 vs. the 101.4 reading in March which was a 14-year high. The Oil Rig count come out at 1:00 PM and Fram Prices at 3:00 PM but are not expected to move the market.
The Earnings Calendar now shows 100 companies that will report today to close our a huge week of earnings. However, don’t relax just yet because next week is also a very big week on the earnings calendar. Keep checking and stay on your toes.
Action Plan
With such a nice rally yesterday I would love to sound the all-clear siren, but the truth is all we have done to this point is to rally back into a zone of resistance. After making significant strides to recover the Bulls now face a tough level of price resistance and the 50-day moving average. Great earnings out of AMZN, INTC, and MSFT after the bell may offer some help, but currently, the Futures markets are pointing to a lower open.
Lately, Friday’s have experienced profit taking as traders the get out the way before the weekend. With Economic reports, this morning expected to show a weakening of consumers in the 1st quarter the bulls may find it challenging to push higher. Of course, with 100 companies expected to report today, we should expect this week’s bumpy ride to continue. Watch for clues of reversal and have a plan to respond. Have a wonderful weekend!
Trade Wisely,
Doug
Potholes abound.
Without question, this has been an odd earnings season full of potholes making for a very rough ride. It began with the big banks beating estimates on both the top and bottom line but found sellers for the effort. Unfortunately, that seems to have become a trend of this season as strong earnings reports continue to bring out the bears. After the bell yesterday, we received a large number of strong reports, and once again the futures are pointing to a bullish open. The question is will the positive open once again attract sellers? A challenging environment to be certain.
The DIA, SPY and the QQQ are farther from the last swing highs of 4/17 and 4/18 then they are from the April lows. The bounce yesterday was a nice relief, but with we remain under the 50-day averages the bears have the advantage, and any weak rally is therefore suspect. Be very careful because the road ahead could be full of deep potholes.
On the Calendar
The Thursday Economic Calendar kicks off at 8:30 AM Eastern with the Durable Goods report. Consensus expects an increase of 1.7% in March with ex-transportation up 0.5% and core goods rising 0.6%. International Trade in Goods also out at 8:30 AM expects the deficit to narrow in March to $74.0 billion. The one last 8:30 AM report today is the weekly Jobless Claims which consensus expects to come in at 230K as strong labor demand remains solid. There are several other reports today as well at three bond events, but they are not expected to be market-moving.
A very busy day on the Earnings Calendar with 387 companies stepping up to report quarterly results. Reports by in large continue to come in strong, but the trend this season appears to attract more sellers than the buyers after strong results. Stay on your toes.
Action Plan
After Tuesday’s strong selloff the indexes managed to find a little buyers support, but bulls seemed to lack conviction. At the end of the day, downtrends are still intact, and the DIA, SPY and QQQ’s remain under significant resistance levels. Stocks that report strong earnings gap up at the open only to find sellers driving the price back down. An odd and very challenging earnings season to trade.
As always the best defense is to say focused on price action and remain flexible. Dow Futures are pointing to a slight gap up open this morning on the back of strong earnings reports. The question is will that once again bring ou the sellers? Tough call. Currently, the Dow is over 950 points away from the swing high on 4/17 and about 700 points from the April low. Stuck in the middle of the range I think anything is possible and traders have some very tough decisions to make. Plan your risk carefully if you decide to trade and prepare for the possible intraday whipsaw that could reverse the market direction.
Trade Wisely,
Doug
Shock-waves
Yesterday I wrote that the market was looking for inspiration and the bears certainly found it during the CAT conference call. During the call, CAT pointed to the first quarter as the high water mark for the foreseeable future, and that sent shock-waves through the entire market. Stocks that were enjoying nice bullish moves but quickly reversed as bearishness spread across most market sectors.
In yesterday’s note and morning prep video, I mentioned how important it was for the bulls to recapture the 50-day average or it would open the door for the bears. That turned out to be correct, but I have to admit I was surprised by the violence of the move. As a result, lower highs in the DIA, SPY and the QQQ are now confirmed raising the possibility of a retest of April lows. Futures are pointing to a follow-through gap down this morning to drive home the point that the bears are back in control. With so many earnings reports on the calendar, more shock-waves are certainly possible.
On the Calendar
A light Wednesday on the Economic Calendar with only one market-moving report. At 10:30 AM Eastern the EIA Petroleum Status Report could be very important for the market today in the light of yesterdays sell-off. Oil and oil stocks have enjoyed a strong bullish move due to the tension in Syria and the drop in supply numbers from the last status report. Other than that we have a Mortgage Applications report at 7:00 AM and 2-bond auctions that finish the calendar day.
The Earnings Calendar nearly doubles from yesterday with 245 companies slated to report results. Yesterday certainly proved that the market reaction to earnings reports can be violent and unpredictable.
Action Plan
With more than 600 earnings reports yet to come we must be prepared for a bumpy ride. I mentioned yesterday to stay focused on price action and remain flexible, but holy cow yesterday’s bearish reaction to mostly good reports was shocking. The major selling seems to have triggered during the CAT conference call when they referenced the first quarter as a high point and expect results to diminish looking forward. Your guess is as good as mine as to how that statement translated into a broad-based selloff.
Dow futures are currently pointing to gap down by more than 100 points, and the VIX appears set to break its current downtrend. Please keep in mind that as the market chews through all the coming reports that anything is possible. While the move yesterday may have seemed irrational, please remember it can remain that way much longer you can stay liquid. Set your bias aside stay focused on price action and follow it rather than fight it. Expect the bumpy ride to continue with fast price actions and possible intraday whipsaws that could quickly reverse direction.
Trade Wisely,
Doug
Looking for inspiration.
Yesterday’s insipid price action seems to have finally given way to a little bullish inspiration this morning. Futures are pointing to a substantial gap up but will need some follow-through buying if we are to recover the 50-day averages on the DIA, SPY and the QQQ. Let’s hope earnings continue to inspire market confidence because we are at a critical decision point.
A failure to recover and hold the 50-day average could easily inspire a bear attack and confirm another lower high in the market. However, if earnings continue to show pricing strength and the bulls get back over this important support, it could provide the bullish inspiration for another leg higher. As of this moment, the bulls seem to have the upper hand, but with so many reports over the next few days, anything is possible. Stay focused and buckle up it could be a wild and bumpy ride.
On the Calendar
The Tuesday Economic Calendar has three potential market-moving moving reports. At 9:00 AM the Case-Shiller is expected to stay very strong even though consensus says it will pull back to 6.2% vs. 6.4% year-on-year. The biggest number today is the New Home Sales report at 10:00 AM which forecasters see an improvement to 630,000 for March vs. the February reading of 610,000. Also at 10:00 AM is the Consumer Confidence staying very strong but slipping slightly to 126.1 in April vs. 127.7 March print. The Richmond Fed Mfg. Index and the State Street Investor Confidence also come out at 10:00 AM but are not expected to move the market. We have 3-bond auctions this afternoon to complete the calendar day.
The Earnings Calendar currently shows 174 companies will report today. Make sure you’re checking reporting dates on all stock you currently own and have a plan to deal with possible big price moves that can occur.
Action Plan
Yesterday saw a bit more choppy price action selling led by the tech sector as AAPL continues to suffer from bear attacks. The DIA, SPY and QQQ’s are all below their 50-day averages with IWM still holding solidly above. Currently, the Dow Futures are pointing to a solid gap up open of more than 100 points responding to positive earnings reports. With so many big reports coming out over the course of this week expect and extra short of volatility, big gaps, and very fast price action. As of now the bulls seem inspired by the earnings results but keep in mind with hundreds more over the next several days that their mood can quickly shift. Stay on your toes, remain flexible and focus on price action.
Trade Wisely,
Doug
Earnings uncertainty.
Reading through weekend headlines there seems to be talking heads all over the spectrum. One will almost giddy with bullishness and the next profession extremely bearishness. Blah, blah, blah. Although they all seem so very self-assured, as to they’re correctness the truth is they are as uncertain as we all are and just talking up their positions. So what’s a retail trader to do with so much earnings uncertainty?
Remember that Price is King! Focus on price action without bias, and directional clues will always present themselves is we patiently wait for them. Easier said than done. Especially for those caught up in the myth that they have the power to predict. I gave up the idea that I could predict years ago and dedicated myself to simply following price. It’s the institutions with their trillions of dollars that determine the direction of a stock. As retail traders, we can hitch a ride if we stop predicting and learn to follow price action. Supporting my family as a full-time trader for the last 13 years is a testament to that truth.
On the Calendar
On the Economic Calendar, this Monday the Chicago Fed National Activity Index kicks of the day at 8:30 AM Eastern and is not expected to move the market. However, the PMI Composite Flash at 9:45 AM and Existing Home Sales at 10:00 AM could easily move the market. First, the PMI expects a reading of 54.6 overall with manufacturing at 55.0 and services coming in at 54.5 according to consensus forecasts. Secondly, the Housing Starts consensus expects a slight decline to 5.528 million annualized units vs. the 5.540 April reading. After that, we have three bond events to wrap up the calendar day before noon on the east coast.
Today begins the heaviest week of earnings reports this season with just over 100 expected to report today. Before the bell, we will hear from HAL, HAS, KMB & OPB to name a few. After the bell, all eyes will be on GOOG, GOOGL, CNI & AABA.
Action Plan
With so many earnings reports this week, prepare for the possibility of big gaps, whipsaws and fast price action, particularly in the morning session. Thus far, earnings by in large, have come in pretty strong and analysts seem to expect positive results to continue. The big question is will it be enough to impress a nervous market with AAPL moving lower and 20-year treasuries moving up toward 3%. Futures markets have been under pressure most of the night as markets sold off around the world due to interest rate worries.
Currently, the Dow futures are trying to recover from overnight lows but suggest a flat to slightly bearish open. That, however, could quickly change as earnings reposts roll in this morning. We should plan for considerable earnings volatility and fast price action around the open for the rest of the week. Keep a very close eye on price action for directional clues.
Trade Wisely,
Doug
Big Decision lies Ahead
A big decision lies ahead for the market. Currently, the indexes seem stuck between a rock and a hard place with moving averages trying to provide support and significant overhead price resistance trying to hold them down. Currently the bulls the and bears seem somewhat equally balanced, and both sides appear to be waiting for inspiration. With around 800 companies expected to report earnings next week, they may find the catalyst to needed to make a decision.
The big question is who will gain the upper hand, the bulls or the bears? As we saw yesterday, just the hint that AAPL could miss on sales expectations sent the stock sharply lower. It obviously wouldn’t take much to embolden the bears producing another lower high in the index. However, if the earnings can continue to come in strong, it may provide the energy required to finally break-through resistance levels. As short-term traders, we must prepare for both possibilities just in case that big decision occurs next week.
On the Calendar
We have a very light Friday Economic Calendar with no market-moving reports. We have Fed speakers at 9:40 AM and 11:15 AM as well as the Baker-Hughes Rig Count at 1:00 PM to finish the day.
We also have a light day on the Earnings Calendar with only 25 companies expected to report. Among them CFC, CLF, GE, and HON.
Action Plan
We saw a bit more selling then I was hoping for yesterday, but at the end of the day, the bulls did make an effort to defend price supports. There was some significant pressure in the tech sector as AAPL sold off sharply on worries the company with fall considerably short of sales expectations. The fear of slowing mobile demand put pressure on the entire tech sector yesterday with the QQQ testing it’s 50-day average. The good news is the selling did not seem to ruffle market fears with the VIX showing very little interest in moving yesterday. Currently, the Dow Futures are suggesting a relatively flat open but as earnings come out this morning that could certainly change quickly.
I still think the market wants to take a little rest around the 50-day averages as we head into the weekend. Next week is a big week for earnings reports, and perhaps that will provide some directional inspiration. Some strong reports could provide just enough energy to the bull to attack overhead resistance. On the other have if earnings disappoint the bears could produce another lower high in the indexes and fail to hold the moving average support. Although I hope the bulls will prevail, I know that I must also prepare in the event the bears gain the upper hand. Consider that as you plan your risk heading into the weekend.
Trade Wisely,
Doug
If you listen to the financial news, they blame yesterdays 300 point Dow selloff on Trade War jitters. Okay, if that’s the case what changed midday to cause the rally that recovered the entire selloff to close the day up 5 points? If I were to define the price action in a single word, it would be Insipid, (no vigor). The bulls are certainly lacking vigor unable to find buyers even on strong earnings reports. And although we are in a current downtrend, the bears also seem lacking conviction allowing intraday whipsaws and reversals to occur almost daily.
