Earnings
Earnings seem to be just what the doctor ordered as the bulls step up and show a willingness to follow-through. With significant technical damage to repair in the index charts, let’s hope a good earnings reports can continue to inspire the bulls to break through resistance levels. With all the political turmoil swirling about we must remain on our toes and have plans to manage the risk. The VIX is showing signs of improvement, and with the reduction of daily reversals, a swing traders edge is also returning.
Keep in mind, repairing the technical damage in the index charts can be a challenging and choppy process. However, if volatility remains in check, then stock pickers with good technical skills will once again have the upper hand. Go Bulls!
On the Calendar
Today the Economic Calendar has two market-moving this Tuesday. First at 8:30 AM Eastern, Housing Starts according to forecasters will post solid gains in March of 1.264 million annualized starts while permits slip slightly to 1.315 million. Secondly at 9:15 AM the Industrial Production is expected to report a 0.4% gain overall with a 0.2% increase in capacity utilization climbing to 78%. The Fed has a lot to say today with four speakers at 9:15, 10:00, 11:00 and 1:40. The Redbook report at 8:55 and bond auction at 11:30 are very unlikely to move the market.
On the Earnings Calendar, we have a busy day of important reports with GS, JNJ, PGR, and UNH reporting before the bell. After the bell, we will hear from the likes of CSX, IBM, ISRG, and UAL. In total there are 50 companies expected to report results today.
Action Plan
I had mentioned a couple of weeks ago that earnings would likely be the best chance of settling market nerves and allow the market to pick a direction. So far that seems to have been correct with market finally showing signs of follow through without the daily flip-flop. Unfortunately, earnings commonly produce big opening gaps still making for a challenging trading environment, but the VIX is finally calming slightly.
Good earnings reports are just what the market needs right now as the indexes challenge the resistance of their 50-day moving averages and price action resistance levels. The Dow Futures currently indicate a gap up of nearly 150 points at the open moving the index back above the 50 SMA. The SPY and the QQQ will also attempt to breach this important average at the open today. Continue to expect fast price action and keep in mind the bears are not likely to give up easily, and the risk of intraday whipsaws still exist. With geopolitical issues continuing swirl overhead we can’t just throw caution to the wind. Have a well thought out plan for every trade.
Trade Wisely,
Doug
Whipsaw
Once again the market is set for a pre-market whipsaw of more than 100 Dow points. Traders that entered short positions based on the bearish patterns below the 50-day average in the DIA, SPY, and QQQ may be forced to by to cover if the bulls remain strong after the open. Overnight whipsaws are incredibly difficult to trade unless you’re capable of picking a direction, placing your bet, closing your eyes and letting it ride. Tough to do and consequently times like this can chop a traders account to pieces.
One way to handle such volatility is to plan trades of a smaller size to limit your risk. Placing a trade of half or even a quarter of your normal trade size can help a trader better deal with the whipsaws and fast price action. If the trade does move in your favor, you can always add to the position. If you find yourself trapped by an overnight reversal, you may still have to take a loss, but small losses are much easier to recover from and not as psychologically damaging. Remember trading is not a sprint, it’s a marathon.
On the Calendar
The Economic Calendar hits the ground running this Monday with four potential market-moving reports. The most important report, Retail Sales, is released at 8:30 AM Eastern which forecasters expect a 0.4% increase in the headline number with ex-auto sells less robust at 0.2%. Also at 8:30 AM is the Empire Stae Mfg Survey that consensus suggests will remain very strong with a reading of 18.2 in April while declining slightly.
At 10:00 AM Business Inventories are expected to show a 0.6% rise in February inventories remaining very strong. Also at 10:00 AM the Housing Market Index is expected to show home-builder confidence remains steady with a 70 print in April according to forecasters. Then at 4:00 PM, Treasury International Capital reports the demand for long-term U.S. Securities, but there is no forward-looking forecast for this report. We have one Fed Speaker at 1:15 PM and three bond events to round out this busy calendar day.
On the Earnings Calendar, there are 45 companies reporting today with SCHW and JBHT before the bell, but all eyes will likely focus on the first to of the FANG stocks to report, NFLX after the bell.
Action Plan
I have to admit to being a little disappointed that the strong earnings reports of C, JPM, and WFC were not enough to dissuade the bears from selling into the close on Friday. The potential of a Syrian military response by the U.S. proved stronger than these big banks beating on both the top and bottom line. The bearish engulfing candle patterns under the 50-day average certainly are a concern and if price action follows-through to the downside it would confirm a lower high in the current downtrend. However, the current futures are pointing to substantial gap up at the open as the bulls try to prevent follow-through selling.
With the Dow Futures suggesting another overnight reversal of around 150 points, price volatility remains high and difficult to trade. Traders currently holding positions should expect big price swings and whipsaws to continue as we challenge the strength of index resistance levels. Slipping into a wide range consolidation is certainly possible around the 50-day average. Plan your risk carefully.
Trade Wisely,
Doug
Earnings Season
With the analysis expecting a strong 2nd quarter earnings season there may finally get the catalyst need to pick a direction and stop all the flip-floping price action. If we do begin to recover the path ahead is filled with lots of resistance hurdles and political uncertainty it must continue to manage. However, a good round of earnings could do a lot to calm the nerves of traders and investors as long as inflation remains in check.
Although earnings create is own brand of volatility it will mostly directed at individual stocks. Anything is possible, but my hope is the big daily swings will subside, but I would continue to expect frequent market gaps and fast price action as markets deal with resistance and react to the earnings reports. The fast price action could still be very challenging, but earnings may be the light at the end of the tunnel we have been waiting for to give an edge back to good stock pickers.
On the Calendar
The Friday Economic Calendar has three Fed Speakers at 7:30 AM Eastern, 9:00 AM and 1:00 PM to both open and close the calendar day. At 10:00 AM Consumer Sentiment is expected to soften slightly to 101.0 vs. March reading of 101.4, a 14 year high. Also at 10:00 AM the JOLTS report is also expected to ease but continue to show a strong labor demand at 6.143 million job openings. The 1:00 PM, the Oil Rig Count, is not expected to move the market.
Second quarter earnings season kicks off today with C, JPM, PNC, and WFC all reporting before the bell. Analysts are expecting very positive results from the banks showing substantial earnings growth.
Action Plan
With easing Syrian tensions, the bulls stepped up to the plate yesterday and displayed strength all the way through the close. With several big banks expected to kick off 2nd quarter earnings with strong results, do we dare hope for a bullish follow-through today? I can only guess, but if earnings come in as strong as expected, then I would venture an answer of yes, and it could finally help reduce market volatility.
Keep in mind; the index charts have a lot of overhead resistance they still have to overcome, and an armed conflict with Syria will continue to weigh heavy the mind of the market as we head into the weekend. If in fact, the market does spill off some of this extreme volatility then swing traders with good technical skills could find a target rich environment of discounted stocks. I wish you all a wonderful weekend.
Trade Wisley,
Doug
Threat of military conflict.
With 2nd quarter earnings just around the corner, I get the impression the market wants to go up but is tentative due to the threat of military conflict with Syria. Another consideration is the coming weekend. Will traders hold with the uncertainty of military action or will they prefer to exit positions much like we saw last Friday? As the CEO of your trading business, what will you do? Making the decision even harder is the daily reversals in the overnight futures prices. It’s a tough call.
There are a lot of charts shaping up and forming good patterns, but with the market flipping direction on a daily basis it’s difficult to plan trades when your edge and slip away in the overnight session. If you do decide to trade it may be wise to take smaller than normal positions as a way to compensate for the uncertainty. If the market moves in your direction and actually follow through for more than just one day one could always add to the position. With the VIX stubbornly holding above a 20 handle expect volatility, whipsaws and fast price action to continue.
On the Calendar
We kick off Thursday with the weekly Jobless Claims at 8:30 AM Eastern which consensus expects to come in at 230,000 showing strong labor demand. Also at 8:30 AM is the Import & Export Prices which expects imports to show a modest increase of 0.2% with export prices up 0.3%. Nonmarket moving reports form Bloomberg Consumer Comfort Index, Natural Gas Report, 4-bond events, Fed Balance Sheet, Money Supply and a Fed speaker at 5:00 PM to finish up the calendar day.
On the Earnings Calendar, I see 24 companies are stepping up report results today. Remember 2nd quarter earnings officially kick off tomorrow with several big banks reporting.
Action Plan
Yesterday a gap down of about 200 points and this morning a gap up of more than 100 points is currently indicated in Dow Futures. The VIX continues to rest above a 20 handle and above its day moving average as sabers rattle between the US and Russia. With the uncertainty of conflict, oil prices continue to sharply rise which we will likely translate to higher prices at the pump very soon.
With the uncertainty, we should prepare for fast price action and quick reversals if military action begins. Let’s hope cooler heads prevail, and an armed conflict never occurs. These daily reversals are becoming tiresome, but perhaps we can get some relief with the kickoff of 2nd quarter earnings and see a direction maintained beyond a single day. However, with the weekend just around the corner, traders will have to decide if they want to hold with the threat of military conflict looming. It could be a bumpy ride.
Trade Wisely,
Doug
Follow Through
Yesterday’s big bullish move was certainly encouraging. Obviously, the market has no trouble making big daily moves and has certainly proved that over the last couple weeks. Following through, on the other hand, seems to be a puzzle the market seems unable to solve. Yesterday the Dow gaped up nearly 300 points and managed to push higher closing up 428 on the day. However, with the Dow Futures currently indicating to a gap down of more than 200 points at the open follow through once again appears to be a major problem.
To maintain a trading edge, most traders need at least one day of follow through in a stocks price action. Even during periods of normal market consolidations, good technical analysts can do very well. Unfortunately, when the market experiences big overnight gaps on a daily basis that changes direction almost every day maintaining an edge is nearly impossible. The good news is this very whippy price action will eventually end, and better days lie ahead. Protect your capital and wait for those better days when the market proves it can follow through or watch your account get chopped to pieces trying to fight the whip. The choice is yours.
On the Calendar
On the hump day, the Economic Calendar has four potential market move reports. At 8:30 AM Eastern the Consumer Price Index is expected to come in flat according to consensus. Core prices could see a modest 0.2% increase with the overall CPI rising to 2.1%. At 10:30 AM is the Petroleum Status Report which is not forecasted forward but has recently seen supplies decline supporting oil prices. Then at 2:00 PM we get to take a look at the minds of the FOMC with the release of the minutes which can obviously move the market. Also at 2:00 PM is the Treasury Budget which is expected to show a large deficit of 186 billion.
On the Earnings Calendar, we only have 11 companies reporting earnings. Notable before the bell is FAST and after the bell, BBBY step up to report.
Action Plan
We whip up one day and whip down the next, chopping up accounts and destroying the confidence of traders trying to fight it. After a nice gap up and run yesterday traders now face another overnight reversal with the Dow Futures pointing to more than a 200 point gap down. If you stand in a fire, then you have to accept the likelihood you will get burned. There is little to no edge for swing traders in this kind of whippy price action. As a result, I will continue to stand aside protecting my capital from being chopped up and waiting for an edge to return.
Trade Wisely,
Doug
A single Speech
What a difference a single speech can make during periods of political volatility. In what seems to be a dramatic policy reversal of trade the Chinese leader appeared to agree to all the Fair Trade points that have been made by the President. Let’s hope words actually translate into an enforceable agreement that finally levels the playing field. Clearly, this will take time, and there will still be considerable political jockeying, but at least for the moment, the market seems able to breathe a big sigh of relief.
All eyes will likely focus on the testimony in Congress by Mark Zuckerberg and what it could mean for the future of FB as well as other data-heavy tech business. I wouldn’t expect a quick resolution. In fact, we could easily see a lot of regulation and government over site in the months and even years to come. Needless to say, it could be a bit stressful for those holding FB as this process unfolds.
On the Calendar
The Tuesday Economic Calendar kicked off very early this morning with a Fed Speaker at 4:30 AM and the NFIB Small Business Optimism Index. The most important report today, PPI, comes out at 8:30 AM Eastern where consensus expects a modest increase of 0.1 in March however the high estimate is at 0.4%. Remove food and energy, and the expectation is for a gain of 0.2% with energy and trade services up 0.3%. Other reports not expected to move the market today are Redbook, Wholesale Trade, two bond auctions and another Fed Speaker at 6:30 PM.
The off Calendar testimony of Mark Zuckerberg at two Congress session will likely dominate the news today and could easily move FB stock and could affect another tech prices as well today.
On the Earnings Calendar, I see only 15 companies reporting earnings today, none of which are likely to move the overall market.
Action Plan
Yesterday produced a nasty whipsaw with the bulls moving the Dow up as much as 400 points only have the Bears come back in with a vengeance late in the day. Then after the close, China extended an olive branch essentially saying they plan to make huge concessions on trade which of course created yet another whipsaw in the overnight futures session. As I write this, Dow Futures are indicated to open sharply higher by more than 250 points. If the words actually translate into a fair trade deal with China, it could dramatically improve the overall economic outlook in the US. Let’s keep our fingers crossed.
With the big morning gap on fading trade concerns, a short squeeze could easily trigger pushing the indexes sharply higher. Keep in mind however that just one Tweet or poorly worded comment could send the indexes reeling so stay on your toes. Expect fast moving prices and whippy price action this morning as the market reacts.
Trade Wisely,
Doug
You have control.
In a market producing daily gaps, overnight reversals, and intra-day whipsaws it seems that chaos is now in control of a traders destiny. Not true. As the CEO of your trading business, you have control and are ultimately responsible for your trading decisions. I have to admit this was a very hard lesson for me to learn and it cost me a lot of time and capital before the truth of that statement sank into my hard head. I would blame the news, some talking head, earnings the President or anything else I could think of for the reason I was losing money during volatile markets. The truth is the problem was me!
I was the one deciding to trade when there was no edge. It was me pulling the trigger, and I was the one that needed to accept the responsibility of losing money when I was trying to fight a volatile market. While it’s true someone is making money in the market every day that doesn’t mean your particular style or skills will. If you feel like your fighting the market and consistently losing money, then you probably are. You are in control. Stop trading until the volatility subsides and your edge returns. One of the hardest things in the world is to face the person in the mirror and admit you are the problem. However, if your consistently losing money in this environment perhaps it’s time to have that face to face an realize you have control.
On the Calendar
We kick off the 2nd week of March with a light day on the Economic Calendar with no expected market-moving scheduled. We have three bond events and the TD Ameritrade IMX which intends to show how investors have positioned themselves in the market. Keep in mind that the FOMC minutes come out Wednesday of this week.
On the Earnings Calendar, there are just over 34 companies expected to report earnings. Although all earnings are important if you happen to hold or thinking of buying a company that’s expected to report, I don’t see any particularly market-moving reports today.
Action Plan
Friday was sure discouraging as the Bears overwhelmed the bulls closing the Dow down 572 points. The good news is that four major indexes managed to hold above their 200-day moving averages. The bad news is that each index closed the day with a bearish evening star pattern that produced another lower high in the current downtrend.
I have mentioned that the volatility created by political spin I consider to be one of the most challenging environments for traders. Huge overnight reversals and nasty intra-day reversals can happen the instant a new spin from the media or tweet comes out which means retail swing traders have little to no edge. Chart patterns and candle patterns which is the bread and butter for most swing traders only serve as traps that deliver big losses and chop up accounts in such a whippy environment. Once again the overnight futures are producing a big gap and suggesting yet another reversal with the Dow currently looking to open 150 points higher. With overnight whipsaws that are this extreme, trading is hard to distinguish from betting red or black on a Vegas Roulette wheel.
Trade wisely,
Doug
Tariff tensions.
With more tariff slings and arrows launched between the US and China overnight, the market once again makes a big overnight reversal. As the tensions escalate, traders will have a decision to make as we head into the weekend. Do you hold and accept the risk of possible big Monday gaps or do you take close positions to avoid the risk? A tough decision to be sure.
The Employment Situation report this morning is expected to show our economy is strong. However, the market is also walking a tightrope here due to the possible wage inflationary pressures. As in the Goldilocks nursery rhyme, we need the porridge to be just right, or additional market concerns could also contribute to market volatility. One thing seems certain; big daily price fluctuations are likely here to stay at least for the short-term.
On the Calendar
The Friday Economic Calendar has only one market-moving report at 8:30 AM Eastern. The Employment Situation report is expecting about 185,000 in jobs growth in March non-farm payrolls. The unemployment rate according to consensus declines to 4.0% pointing to the full employment and the possibility of future wage pressures. However, consensus only expects a 0.3% increase in hourly earnings with a yearly uptick to 2.7%. Manufacturing payroll is expected to increase by 20,000 with the average work week coming in unchanged at 34.5 hours. Consensus also sees the labor participation rate ticking higher by two tenths to 62.8% We have three Fed Speakers today with first at 10:30 AM and the second speaking at 1:30 PM and last talking at 4:00 PM.
A rather light day on the Earnings Calendar this Friday with only 17 companies expected to report results.
Action Plan
After two nice days of the market rally on decreasing fears of tariff uncertainty, the White House stepped up the rhetoric asking for another 100 billion in tariff increases. There was an instant knee-jerk reaction with the Dow Futures quickly sinking more than 400 points after the news release. Of course, China quickly responded with reciprocal threats. Throughout the evening the Futures markets rallied back significantly but at this time indicate the Dow could gap down about 200 points at the open.
Such political uncertainty will likely keep the markets nervous and price action very volatile for the foreseeable futures. As I mentioned yesterday traders will have to plan for this additional volatility and carefully weigh the risk because these big overnight reversals can be very punishing to your trading accounts. Maintaining an edge is all but impossible with such politically charged volatility.
Trade Wisely,
Doug
Massive Short Squeeze
The quickly shifting sentiment on Trade War fears was reversed yesterday as White House officials spoke calmly of their intentions triggering a massive short squeeze yesterday. From opening low to the high of the day, the Dow traveled more than 775 points. There is still a lot of work to be done to confirm a market bottom, but yesterday bullish engulfing pattern at a major moving average is certainly a nice start.
The negotiations with China are far forming over so don’t’ be surprised if jitters and shock waves keep the market off balance and volatile in the day to come. With so many charts producing buy signals, yesterday traders will have to be choosy and carefully weigh the risk of volatility against their tolerance when planning new positions. Also, keep in mind after such a big move we could see some profit taking or consolidation ahead of the Friday’s job report.
On the Calendar
There is a full Economic Calendar this Thursday, but only two market-moving reports that both come out at 8:30 AM Eastern. The International Trade deficit is expected to widen slightly to $56.7 billion in February. This deficit is one of the trade metrics that is under negotiation with China that could quickly improve if a fair trade deal. Then we have the Weekly Jobless Claims which consensus expects to come in at 230K. Other than that we have several lessors reports a bunch of bond announcements and a Fed Speaker at 1:00 PM.
The Earnings Calendar is only showing 19 companies reporting earnings today. Notable before the bell is MON, and then after the bell PSMT reports.
Action Plan
A big win for the Bulls yesterday after gaping down about 500 points the Dow recovered sharply to close the day up 230 points. Such is the nature of politically generated volatility as panic, and then relief quickly reverses market sentiment. Big bullish engulfing candles now grace all 4 of the major index charts at or near the daily 200 moving average. Current downtrends have yet to reverse, and there is a lot of overhead resistance to deal with but yesterdays price action was a good start to a potential recovery.
Currently, the Dow Futures, point to a higher open but don be surprised if the market rests or pulls back as we wait for the Employment Situation report before the market open on Friday. There are a lot of very good looking charts in the watchlist and scans. If you trade to keep in mind, the threat of politically generated volatility still exists so plan your risk accordingly.
Trade Wisely,
Doug
Political Volatility
I have mentioned how challenging politically motivated volatility can be for traders. The cruel overnight reversal triggered by a single Tweet is evidence of how damaging it can be to a traders account. As technically, analysts, we try to maintain an edge through the study of price action. Unfortunately, that edge completely disappears during periods of political uncertainty. Very fast and experienced day traders can make hay in this kind of environment and investors simply ride it out. It’s the swing trader that’s particularly disadvantaged by the violently shifting sentiment. During times like this holding on to an edge is a bit like trying to rope the wind.
On the Calendar
The Wednesday Economic Calendar has several reports that the market could get a reaction from today. At 8:15 AM Eastern ADP Employment report is looking for a slow down in job gains to 185,000 vs. 234,000 reading in February. The Factory Orders at 10:00 AM is looking for a solid rise of 1.7% adding to the impressive strength of the February reading. Also at 10:00 AM the ISM Non-Mfg Index is to continue showing strength with an expected reading of 59.0 today according to consensus. Then at 10:30 AM we will get the EIA Petroleum status numbers which do not forecast forward but certainly have the power to move the market substantially. Filling out the rest of the calendar we have the PMI Services index which is not expected to move the market as well a 2-Fed Speakers to be aware of at 9:45 and 11:00 AM.
We have only 36 companies on today’s Earnings Calendar. Most notable is the report from CAR before the bell, and after the bell, we will get results from the home builder LEN.
Action Plan
Yesterday we had some sweet relief as the bulls started the day positive and continued to push higher steadily higher through the day closing the Dow up 389 points. Unfortunately, all that good work looks to be completely reversed this morning as the Trade War rhetoric heats up. As I write this, Dow Futures are pointing to a 500 point gap down as both the US and China issue threats of new tariffs.
As I mentioned earlier this week politically inspired volatility is a very challenging environment in which to trade. Violent reversals that shift the course of the market, with the efficiency of the instant news cycle. Swing traders are disadvantaged in such an environment which is clearly evident this morning. Keep in mind the market could change again with the speed of a Tweet so plan your risk accordingly.
Trade Wisely,
Doug
Earnings seem to be just what the doctor ordered as the bulls step up and show a willingness to follow-through. With significant technical damage to repair in the index charts, let’s hope a good earnings reports can continue to inspire the bulls to break through resistance levels. With all the political turmoil swirling about we must remain on our toes and have plans to manage the risk. The VIX is showing signs of improvement, and with the reduction of daily reversals, a swing traders edge is also returning.
