Looking for Inspiration
Another day passes with the market looking for inspiration. We saw the Bulls at work in the QQQ and IWM yesterday with Bears winning the day in DIA and the opposing sides about equally in the SPY. Overall trends are still bullish as this battle at resistance has yet to reveal a clear directional conviction. Asian markets closed mixed and European markets currently lean slightly bearish. Surprisingly the Dow Futures are currently a flat open even as the US and China raise tariffs by another 16-billion.
With the bullish trends still intact, I remain cautiously optimistic but recognize the fact that at any time as bulls and bears battle near resistance that either side could easily gain control. So as they continue to look for inspiration, I must also be careful not to over trade and closely watch price action for clues. The old phrase, “hurry up and wait,” seems very appropriate for the current market condition.
On the Calendar
The Jackson Hole Economic Symposium begins today which will likely create a significant number of headlines that could have some market effect. Weekly Jobless Claims will kick off the Economic Calendar at 8:30 AM which consensus expects a small increase to 215,000. At 10:00 AM we will get the latest reading on New Home Sales which are expecting a solid increase to 649,000 vs. 631,000 in June. The Natural Gas Report @ 10;30 AM and the Fed Balance Sheet @ 4:30 indicated as potential market-moving but unless there is a major surprise it’s unlikely.
On the Earnings Calendar, we have nearly 50 companies expected to report results. Before the bell, we will hear from BABA & HRL with SDSK, GPS, INTU and ROST reporting after the close.
Action Plan
The Bulls showed some tenacity yesterday especially in the QQQs and the IWM indexes. The SPY made another attempt to break through to record highs however finished the day just below. The Bears were the most active in Dow with the index slipping 88 points to test the March high as support. Durning the night futures were slightly weak but once again have managed to rally, currently indicating a flat to slightly bullish open.
All and all the Bulls have maintained control even with lighter than average volume. With 16-billion in new US tariffs and Beijing immediate retaliation of 16-billion, I’m surprised the market is shrugging it off as if nothing happened. Once again I would suggest traders use a little caution as we dance around record highs. Big moves up or down are possible as we consolidate near resistance. Also, remember head fakes and whipsaws are common near market highs so stay focused on price and plan your risk carefully.
Trade Wisely,
Doug
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Stalemate at Resistance
As the Bull worked to push the markets higher yesterday, the Bears battled them to a stalemate at price resistance. Unfortunately, they left behind the potential topping candle patterns on the DIA, SPY, and QQQ. At resistance, the Shooting Star Candle Pattern should give a little pause and raise our caution levels. However, a single candle pattern is only a very short-term clue. To increase the importance of a shooting star pattern, it must follow-through with bearish price action.
As a result, there is reason for traders to approach the market this morning with a little caution but no need to run for the hills in panic. After such a strong rally where the Dow has gained nearly 850 points from last Wednesday’s low a simple consolidation at the highs is certainly possible. Give price resistance respect and stay focused on price action. If you can lock in some profits to reduce risk and be careful not to load up on new risk because a stalemate can shift directions very quickly.
On the Calendar
We have had it easy so far this week, but today on the Economic Calendar we have three potential market-moving reports. At 10:00 AM forecasters expect Existing Home Sales to increase to 5.420 million in July. Then at 10:30 AM we will get the result of the unforecast EIA Petroleum Status Report. Last but not least the FOMC will release their minutes from their last meeting at 2:00 PM.
On the Earnings Calendar, we have a slightly lighter day, but some name reports that could move the market. Before the bell LOW, TGT & MOMO report with JBSS, HTHT & LB fessing up after today’s market close.
Action Plan
The Bulls managed to rally yesterday setting a new record high close for IWM. The SPY ran up and printed a new record but unfortunately was unable to hold on to it by the closing bell. Shooting star candle patterns were left behind in the DIA, SPY, and QQQ as Bears worked to defend resistance levels. Futures which were down more than 100 points during the evening hours have recovered substantially now indicating a flat open.
I think it would be wise to exercise a little caution this morning with the battle at resistance in full swing. Keep in mind with the FOMC minutes released at 2:00 PM we could see the light choppy price after the morning rush as the market waits.
Trade Wisely,
Doug
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Wall of worry
With the Bulls climbing the wall of worry toward resistance and all-time highs there seems to be a tentativeness in their pace. Perhaps is the just the summer doldrums with August vacations robbing volume or perhaps such fast rally without a confirmed US/China trade agreement has the Bulls questioning current valuations. Consumer defensive stocks continue to trend higher as do consumer staples and utilities are raising my concern there is a rotation toward safety.
My genuine hope is that the Bulls win the day and market enjoys a solid breakout rally. However, there are clues of caution that we should not ignore. Plan your risk carefully and be careful not to over-trade as the market creeps toward resistance. In my opinion, the QQQ currently appears the most vulnerable to a Bear attack so come on Bulls chug an energy drink and get moving.
On the Calendar
A very light day on the Economic Calendar today. We start with the Redbook at 8:55 AM Eastern and end with a 4-Week Bill Auction with nothing in between.
On the earnings Calendar, there are 32 companies stepping up to report results today. Before the bell, we will hear from, KSS, MDT, SJM & TJX. After the bell, JKHY, LZB, JRJC & MYGN will report.
Action Plan
Asian markets we up overnight as the US and China continue to work on a trade agreement. Currently, European markets are mostly bullish with the FTSE basically flat on the day. US Futures are pointing to a bullish open this morning as the Bulls continue their tentative push higher. The Dow closed above its March high while the SPY inched its way toward price resistance and new record highs. IWM also seems content to climb the wall of worry, as it grinds toward resistance. Although holding at its uptrend, the QQQ’s appear to be struggling and will be watching closely for failure clues.
Getting this close to a record high in the SPY I want to believe the bulls will get the job done but I also have to give respect to resistance. After all, double top patterns develop in the same way. As a result, we need to keep a close eye on price action as we climb this wall of worry. There are a lot of very good looking charts but be careful in loading up on to much risk given the overall market condition. At the moment the QQQ’s seem the most vulnerable to a Bear attack and should be closely watched.
Trade Wisely,
Doug
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Price Resistance Hurdle
After an exuberant news driven reversal of 700 Dow points, the Bulls face the tough price resistance hurdle to set new record highs in the SPY, QQQ, and IWM. The current momentum certainly favors the Bulls, but we must always have a healthy respect of resistance and remember that the Bears rarely give up without a fight. Plan your risk carefully and remember buying at resistance is a risky business if the Bears rally in defense.
Asian markets were mixed but mostly higher overnight while European markets are decidedly bullish this morning. Consequently, the US Futures are currently pointing to a modestly bullish open. With a light morning on Earnings Calendar and no major Economic reports standing in the way the path to a breakout appears open if the Bulls can find the energy.
On the Calendar
We coast into this week’s Economic Calendar with a very light day and no expected market-moving reports. At 11:00 AM we have a Fed Speaker and a Bond Announcement. Then at 11:30 AM there are two Bond Auctions.
The Earnings Calendar this Monday morning shows 46 companies are expected to report. The most notable before the bell is EL with AABA reporting after the market close.
Action Plan
After a very volatile week where Wednesday’s panic reversed to jubilation on Thursday moved the Dow 700 points higher to challenge resistance by the close on Friday. With the Asian and European markets mostly higher, current Dow Futures suggest a bullish open kicking off this weeks trading. The big question is will the Bull have the energy to punch the SPY, QQQ, and IWM through to new record highs. The DIA still has a lot of work to do if it intends to set a new record, however, a breakout and hold above the March high certainty setup the opportunity to do so.
It would be great to see the momentum of this current rally breakthrough resistance levels. However, we must set aside our bias and plan our day with the very real possibility that the Bears could defend price resistance! After a 700 point 2-day rally, a rest or pullback would not be out of the question. Remember buying at resistance comes with a higher risk so plan your trades carefully.
Trade Wisely,
Doug
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Wildly Bullish Reaction
After a wildly bullish reaction to China and the US re-engaging in trade negotiations, the Dow swung more than 600 points from low to high in a single day. In my opinion that was an amazing gift that I took advantage of by taking some profits to the bank. It is very likely that I will take more profits today as we head into the weekend. Currently, the Futures are pointing to a flat open this morning.
The question on my mind is will the momentum of yesterdays rally carry us higher to test resistance levels or will profit-taking ahead of the weekend win the day. Considering the recent volatility of the market anything is possible. Set your bias aside and stay focused on the price action. Keep in mind a US-China deal has not been made. What could the market reaction be if they fail to agree? It may be wise to go to the bank today with at least some of your current profits.
On the Calendar
A lighter day on the Economic Calendar this Friday with only one potential market-moving report. At 10:00 AM Eastern Consumer Sentiment expects to remain unchanged with a very strong reading of 97.9 according to forecasters. Also at 10:00 AM we get reports on E-Commerce Retail Sales & Leading Indicators which are not expected to move the market. To close out the calendar week is the Baker-Hughes Rig Count at 1:00 PM.
We also have a rather light day on Earnings Calendar with only nine companies reporting. The most notable DE which will report before the opening bell today.
Action Plan
After rising nearly 400 points on the news that China and the US have come back to the negotiation table, it makes you wonder what the reaction would be with a completed agreement? From the Wednesday low to the Thursday high is a swing of more than 600 points! Amazing, but where do we go from here? After such a big move it would not be out of the question to see some profit taking ahead of the weekend. However, the sheer momentum of yesterdays move could also carry us a little higher to test resistance levels.
The SPY only needs to gain about 2.50 points to break an all-time high with the QQQ would have a bit more work to do, needing to rise about 3.5- points. It seems hard to imagine they could get this close and not be able to break out but this resistance level has proven itself to be difficult to breach. I personally consider yesterdays move a tremendous gift and used it to take some profits and will most likely continue doing so today. Have a wonderful weekend!
Trade Wisely,
Doug
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Rollercoaster Ride
Another day and another wild rollercoaster ride as the Futures respond sharply higher on the news that the US and China are coming back to the trade negotiation table. Dow Futures currently indicate about a 200 point gap up at the open which will be about 425 points above yesterdays low. Wow, that’s some very difficult volatility to deal with unless you’re a very fast day trader that also happens to trade overnight.
If you’re a swing trader or position trader your, this kind of price action is without question very challenging. Wild swings like this can also inspire poor emotional decision making the and keeping traders off balance. If you don’t feel you have an edge in this wild volatility, then don’t fight it. Step back take a breath and re-engage the market with a clear head when your edge returns.
On the Calendar
We start off Thursday on a dead run with three important market-moving reports at 8:30 AM Eastern. Housing Starts are expecting a decline to 1.271 million in July vs. 1.173 in June with permits rising to a 1.307 million rate. Weekly Jobless Claims expect to continue to show very strong labor demand with a consensus for today of 215,000 wish is 2000 higher than the last reading. Finally, the Philly Fed Business Outlook Survey expects to report a strong 22.5 according to the consensus estimate which seems to be continuously lower than the actual number. We have the Natural Gas Report @ 10:30 AM, 2-Bond Announcements @ 11:00 AM, The Fed Balance Sheet & Money Supply @ 4:30 PM none of which would be expected to move the market.
On the Earnings Calendar, we show 52 companies are scheduled to fess up to their results today. Before the bell, we will hear from JCP, JD, and WMT. After the close AMAT, NVDA & JWN are among those reporting.
Action Plan
Asian markets were lower overnight and appear under stress after making a four-year low. European markets, however, are all showing gains this morning. After another rollercoaster ride yesterday we look to keep the wild price action going with another full overnight reversal at the open. Responding to the report that China and the US are coming back to the trade negotiation table have futures flying high this morning. Currently, the Dow Futures indicate a gap up of near 200 points at the open.
With big morning gaps also comes the possibility of whipsaws so plan your entries carefully and be careful not to chase. Keep in mind, at the open today; the Dow will be about 425 points higher than it was at yesterdays low. Now that’s some wicked volatility to deal with when trying a matain an edge.
Trade Wisely,
Doug
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An absolute mess!
The price action this week has been an absolute mess! Intraday whipsaw and daily overnight reversals have added a layer of complexity to an already very challenging market. When markets go through choppy periods like this, it’s common for traders to lose substantial sums of capital. It’s important for every trader remember that you have a choice. You can continue to fight the chop giving up your edge and watching your account shrink, or you can stand aside protecting you’re capital until your edge returns.
Cash is a position, and in this choppy mess, it may be your very best position. Trading is a marathon it’s not a sprint, and you don’t have to prove anything to the market. If your frustrated and losing money then stop fighting because it’s very easy to compound the losses in this kind of chop. Your edge will eventually return, and good price action will resume, but the question is will you have the capital or the confidence to take advantage of it when it does.
On the Calendar
There is no shortage of potential market-moving reports on this Wednesday’s Economic Calendar. At 8:30 AM Retail Sales expect only a 0.1 percent gain in July due to weakness in vehicle sales. Also at 8:30 the Empire State Mfg Survey expect a slight decline to 20.0 in August vs. the 22.6 July reading while the Productivity and Cost report looks for a gain of 2.5 percent. The 9:15 AM Industrial Production report expects a 0.3 percent gain with manufacturing also moving up by 0.3%. Business Inventories an increase of 0.1 percent and the Housing Market Index is expected to remain flat both coming out at 10:00 AM. The unforecast EIA Petroleum Status Report is at 10:30 AM, and we wrap up this busy day with Treasury International Capital at 4:00 PM.
On the Earnings Calendar, we show only 38 companies reporting. Before the bell, we will hear from M, and after the bell, CSCO and NTAP step up to the plate. Stay on your toes even though earnings season has started winding down.
Action Plan
This morning the Futures are pointing another overnight whipsaw that looks to reverse yesterdays move higher. Even though Turkey’s is in the midst of a serious debt crisis with there currency wildly fluctuating, they decided to put tariffs on US cars and booze. I guess misery, really does love company. Currently, the Dow Futures are suggesting a gap down of nearly 150 points at the open.
I have to say August 2018 has thus far become one of the most frustratingly choppy months we have experienced in a long time. The daily gaps and intraday whipsaws this week has only added another layer of frustration and removed any doubt that a swing traders edge has left the building. If you’re finding your capital is getting chopped up, its time to stand aside and stop fighting this messy price action. Remember Cash is a position!
Trade Wisely,
Doug
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A Nasty Battle
Yesterday’s price action turned out to be a nasty battle between the Bulls and Bears with whipsawing leadership several times and likely chopping up accounts. At the end of the day, the Bears came out victorious leaving behind bearish candle patterns across all 4-major index charts. Normally that would suggest some follow-through bearishness this morning, but instead, the market seems inclined to serve up another overnight whipsaw.
Asian markets closed mixed and European seem to be following suit, but the US Futures are casting aside Turkish jitters with the US Futures decidedly bullish this morning. News that an agreement between the US and Mexico is easing trade tensions. Is this the energy we need to run for new market highs? Maybe, but remember the lesson given us yesterday; Chasing the open with a fear of missing out can serve up some big losses if the market whipsaws once again. Carefully plan your approach to the market this morning with that in mind.
On the Calendar
The Economic Calendar gets going early this morning the NFIB Small Business Optimism Index at 6:00 AM Eastern. Then at 8:30 AM we get the only potential market-moving report with Import and Export Prices. Forecasters expect import price 0.1 percent higher in July with export prices increasing 0.2 percent in July. We have Redbook @ 8:55 AM, and two Bond Auctions at 11:30 AM to close the calendar day.
On the Earnings Calendar, we have more than 250 companies reporting earnings today with retail reports as a central theme. After today the volume or earnings reports drops substantially as the 3rd quarter earnings start to wind down.
Action Plan
I think it’s fair to say that yesterday’s price action was an absolute mess as uncertainty driven whipsaws ruled the day. Across all 4-indexes daily bearish candles were left behind suggesting a high likelihood of more bearish price action today. Well, not so much! It would appear after an announcement that the US and Mexico have come to terms on a new trade agreement all the Turkish jitters have taken a back seat. Once again Futures began to rally around midnight and have continued to push higher with the Dow currently suggesting a 100 point gap up. If you feel a twinge of pain from whiplash, you’re not alone as the market continues to be very challenging to trade.
Is this the news we needed for the Bulls to launch to all-time highs in the QQQ’s, SPY and IWM? Or perhaps could this be just another whipsaw that continues to chop up accounts. Your guess is as good as mine! Avoid getting caught up in the opening drama and resist the urge to chase the gap. If you rushed in yesterday and punished for doing so, don’t repeat the same mistake today. Fool me once shame on you, fool me twice shame on me. I for one will wait for the morning rush to pass and stay focused on price action watching for clues of follow-through buying before deciding on any new risk.
Trade Wisely,
Doug
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Turkish Uncertainty
The market hates uncertainty, and the rapid fluctuations in the Turkish Lira has without question raised some uncertainty. Banks around the world including many US Banks holding Turkish debit will obviously experience some pressure as the Turkish economy struggles. Dow Futures have rallied significantly from overnight lows with the bounce off the Lira. Asian markets closed lower and European markets are also under pressure this morning.
It’s unlikely the fluctuations of the Lira are over so we should expect an increase in volatility as a result. The VIX bounced sharply on Friday indicating some fear is creeping into the markets. It will be incumbent on the Bulls to defend key support levels, or we could experience some technical damage in the index charts. Remain flexible, stay focused on price and be willing to shift if market sentiment begins to shift.
On the Calendar
We kick off the Economic Calendar this week with a very light day. We have a Bond Announcement at 11:00 AM Eastern. Then at 11:30 AM we wrap up the day with two Bond Auctions. I would expect no market reaction.
On the Earnings Calendar, we have just over 140 companies reporting today. Earnings numbers will begin dropping off this week, but although there will be fewer, we must remain vigilant, checking reports against holdings.
Action Plan
Asian markets were sharply lower overnight, and European markets also lower this morning as the collapsing economy in Turkey reverberates around the world. Dow Futures were down nearly 200 points around midnight but have since rallied significantly currently pointing to a market open about 75 points lower. Keep in mind a test of the overnight low would not be out of the question so plan your risk carefully.
Of course, even US Banks are being affected by the Turkish economic issues as they hold significant amounts of the countries debt. The SPY and DIA indexes have the majority exposure of the exposure to the banks and thus will likely experience some volatility as the Turkish currency fluctuates violently. Technically both the SPY and QQQ have failed at resistance however if the Bulls step up and defend support levels another push higher is certainly possible. If prices begin to fail key supports, the Bears could easily take control so keep an eye on price action and prepare for an increase in volatility.
Trade Wisely,
Doug
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Price is King
With all our technology, designer scans and flashy indicators, there is one undeniable truth; Price is King. Traders will spend years trying to find the perfect combination of indicators and write complicated scans in a constant search for the holy grail. I’m no different and have to confess I wasted years on that quest. It was not until I became a student of price that I finally began to experience real account growth.
The simple concepts of price support, price resistance, and trend often get ignored as traders focus only on their indicators. Remember indicators don’t pay you! It’s only when price moves we can get paid. The last few days I have suggested caution and to be careful not to over-trade. Not because I want to see the market pullback but because of price action and price resistance was telling us to be cautious. Price is King and will provide the clues for better trading results if we become students of price.
On the Calendar
Friday begins with the potential market-moving CPI Report at 8:30 AM Eastern. Forecasters expect the CPI to rise 0.2 percent with the year-on-year coming in unchanged at 2.9 percent and the core rate at 2.3 percent. The Baker-Hughes Rig Count is a 1:00 PM and the Treasury Budget closes the day at 2:00 PM. Consensus for July is for a monthly deficit of 73.5 with both spending and tax receipts on the rise.
On the Earnings Calendar, we finally get a little break with only 46 companies reporting earnings today. Although the bulk of earnings reports this season are now behind us, we still have more than 400 on the calendar for next week so keep checking those earnings dates.
Action Plan
Although hopeful the Bulls could push us resistance levels yesterday, the Bears gained a slight upper hand by the close. Durning the night Asian market were mixed but mostly lower and Europian markets are currently lower across the board. As a result, the Dow futures are currently pointing to a gap down of nearly 100 points as I write this. At least, for now, it would seem that resistance has done its job but let’s not count the Bulls out just yet. A light pullback could be all that’s needed for the Bulls to gather energy and reinforcements to mount an attack on the highs.
As the weekend approaches, keep in mind, that the trade tensions between the US and China continue to grow. Carefully consider how much risk you’re carrying into next week with that in mind. There is a very good chance I will trim some positions and take some profits as take my normal trip to the bank on Friday. I wish you all a fantastic weekend.
Trade Wisely,
Doug
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Another day passes with the market looking for inspiration. We saw the Bulls at work in the QQQ and IWM yesterday with Bears winning the day in DIA and the opposing sides about equally in the SPY. Overall trends are still bullish as this battle at resistance has yet to reveal a clear directional conviction. Asian markets closed mixed and European markets currently lean slightly bearish. Surprisingly the Dow Futures are currently a flat open even as the US and China raise tariffs by another 16-billion.
