Riddle me this.
The market is currently presenting us with a difficult riddle. The Bulls and Bears appear equally matched as the indexes hover just below price resistance levels and record highs. Yesterday the Bears had an open invitation to push lower but lacked the conviction to get it done. On the other hand, the Bulls showed a willingness to defend current levels but also lacked the conviction to move up to test resistance. The riddle becomes even more complex with the current futures suggesting a flat open.
Should we buy hoping for a breakout or would it be better to take some profits and avoid adding additional risk? Indeed a difficult riddle for traders to resolve. My personal choice is to remain cautious and closely watch price action for directional clues. I will avoid adding risk this close to price resistance but have a watchlist of good stocks ready to go if the bulls show some conviction. If by chance the Bears attack I have profits locked with stop orders and ready to pick up some negative delta if necessary.
On the Calendar
Jobless Claims and PPI top the Economic Calendar today with both released at 8:30 AM Eastern time. According to consensus estimates the weekly Jobless Claims expect an increase to 220,000 vs. last weeks 218,000 but remains near historic lows. The PPI consensus is for a 0.3 percent monthly increase but exclude food, energy, trade services, and they forecast a 0.2 percent increase. We have a Fed Speaker @ 9:30 AM, Wholesale Trade @ 10:00 AM, the Natural Gas Report at 10:30 AM, 4-Bond events 11:00 AM and 1:00 PM, with the Fed Balance Sheet & Money Supply closing the calendar day at 4:30 PM.
Today we have another big day of earnings with more than 380 companies fessing up to their results. There are still a lot of companies yet to report this quarter but today marks the last of the very big day of reports this earnings season.
Action Plan
The Bears had an opportunity yesterday to move the market lower, but the Bulls dug in and showed a willingness to defend back. As good as that was to see, sadly the Bulls lacked the energy required to be very convincing. With the exception of the QQQ which managed a 0.12 increase the rest of the indexes finished the day slightly lower leaving us with more question than answers.
The Bulls defending this close to resistance levels and record highs in the QQQ and SPY suggests a desire to move higher. However, their lack of conviction keeps alive the concern that the resistance above could be stronger than there desire. Currently, the futures suggest a flat open which is not helping with this conundrum. Long story short we need remain cautious this close to resistance levels and stay focused on price action.
Trade Wisley,
Doug
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Hopium
Are you make good business decisions or are you a trader addicted to “Hopium”? Without a doubt no matter how much profit a position may hold a trader always hopes for more. That’s a normal human reaction, but it’s not a good business decision. With the markets moving higher on lower volume and pushing against record highs and resistance levels have to take some profits or is hopium in control of your decisions?
I struggled with an addition to hopium for more years than I care to admit. I would let winning trades turn into losers always hoping for more. If your walking down the street and a $100 bill blows in front of you, do you stop and pick it up or do you let go by hoping for more? Of course, you pick it up, right? So I ask again are your making business decisions or are you addicted to Hopium, letting winners turn into losers rather than taking a smaller profit.
On the Calendar
The only potential market-moving event on the Wednesday Economic Calendar is the EIA Petroleum Status Report at 10:30 AM Eastern. There is not a forward forecast of US oil supplies however the current trade has proved to support higher prices. Other reports which are unlikely to move the market are, Mortgage Application @ 7:00 AM, A Fed Speaker @ 8:45 AM and a 10-YR Auction at 1:00 AM.
On the Earnings Calendar, we have a big day with nearly 400 companies reporting results. With so many reports it will hard to keep up so make sure you have a well thought out plan of the companies you own.
Action Plan
The Bulls put together another day of rallying toward resistance with slow grinding price action. However, with a little afternoon selling the indexes left behind candle patterns that suggest some caution is warranted. Overnight Asian markets we mixed but mostly lower while Europian markets are currently showing modest gains across the board.
With nearly 400 earnings reports this morning anything is possible by market open, but currently, US futures are mixed and indicating a flat to slightly bullish open. If you’re holding profitable positions, you may be time take some profits or tighten up the stops to protect the gains. Honestly, I hope the bulls push right on through resistance to new highs, but “hope” is not a wise way to manage the business of trading. Our job as traders is to make money, and that’s impossible to do unless we work to take profits consistently.
Trade Wisley,
Doug
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SPY taking the lead.
It was nice to see the Bulls pushing for higher prints yesterday with the SPY taking the lead as the only index thus far being able to break above the prior high. Volume has been light, and price action has been somewhat tentative in this rally. With August being a big summer vacation month its not a big surprise to see lighter volume but it does require us to exercise some caution as we test price resistance levels.
Futures are pointing to a higher open this morning but remember as we test resistance levels we need to watch for possible reversals. As I mentioned yesterday, be careful with how much risk you’re carrying at resistance. As an example, I plan to take some profits reducing risk as we grind toward resistance rather than adding additional risk.
On the Calendar
The JOLTs report at 10:00 AM Eastern is the only potential market-moving report on today’s Economic Calendar. Forecasters expect job openings number to increase in May to 6.638 vs. 6.650 in June. Other than that, we have the Redbook @ 8:55 AM, two Bond events @ 11:30 AM and 1:00 PM with Consumer Credit closing the day @ 3:00 PM.
On the Earnings Calendar, we have more than 385 companies reporting to keep us on our toes.
Action Plan
Yesterday the bulls continued to push higher with a steady slow grind, but only the SPY managed to break above the prior high. The DIA, QQQ, and IWM all move up but continue to remain under price resistance. The SPY is now less than 2-points away from testing record highs, and with Futures currently pointing to a higher open, it seems likely to occur as long as there are no major surprises in earnings reports.
You may have noticed that volume has been quite light in this rally. While that is a bit of a concern keep in mind that August is a big vacation month and it not out of the ordinary. However, it does warrant a little caution as we approach resistance levels. Remember resistance is where we have to keep a watchful eye on price watching for the possible clues of breakout or failure.
Trade Wisely,
Doug
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Long-Term Success
Having the discipline to follow a good set of rules is essential to achieving long-term success as a trader. A rule that has served me very well over the years is to avoid buying stocks at or near price resistance. That rule directly translates to the overall market as well. When the indexes are at or near price resistance levels as they are today, it’s very important to exercise some caution. As we push toward market highs, traders often over-trade loading up on positions very near where failure patterns appear.
Please don’t misunderstand I am not predicting a failure. I, in fact, want to see the market move higher! However, a bullish desire must not cloud your view of other possibilities. As the market approaches resistance, I want to be very focused on price action watching for both bullish and bearish clues. I want to evaluate my current holdings carefully and weigh the consequences of adding additional risk as an index nears a resistance level. Remember good trade management starts well before the position becomes part of your portfolio.
On the Calendar
A light day to begin this Monday on Economic Calendar with no market-moving reports expected. We have three Bond Events between 11:00 & 11:30 AM, the TD Ameritrade IMX @ 12:30 AM and Treasury STRIPS @ 3:00 PM to close the calendar day.
A very big week of earnings reports begins with more than 200 companies results today. Continue to prepare each day by checking earnings reporting dates against the stocks you own or are considering for purchase.
Action Plan
We closed last week with bulls pushing upward to test price resistance levels of the prior week. Unfortunately, they were unable to breakthrough giving us a reason to watch price action closely and approach this morning with a bit of caution. Asian markets were mixed but mostly lower while European markets are choosing to move higher. Currently, the Dow Futures are pointing to a modestly higher open with a busy Earnings Calander that could easily move it around before the open.
By in large earnings reports continue to roll in mostly positive, but the slide in the FB and NFLX continues to weigh heavily on the mind of the market and dampening enthusiasm. Last week the bulls proved the ability to defend against the political uncertainty of a US/China trade war. Now the question is do they have the energy to reclaim price resistance levels and hold them as support. As we test resistance, be careful not to overtrade and stay focused on price action clues.
Tade Wisely,
Doug
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Whipsaw rally
A big morning gap down followed by a sharp whipsaw rally closed the day with the indexes testing resistance levels. It was nice to see the Bulls defend, but the question remains if they have the energy to reclaim this week’s highs. With trade war rhetoric flying around ahead of the weekend we will have to stay focused on price action and remain flexible.
With so much uncertainty and choppy price action, it’s very easy to get caught up in the drama and find yourself over-trading. This is the kind of market that can chop a traders account to pieces if you’re not careful and very disciplined to a set of rules. If you see your accounts grow, then congratulations and keep up the good work. However, if you see your accounts in decline, then it’s time to stop, and regroup. Remember doing the same thing over and over and expecting a different result is the definition of insanity.
On the Calendar
The Friday Economic Calendar gets going with two market-moving reports before the bell at 8:30 AM Eastern. First, the Employment Situation report which is expected to remain very strong with an increase of 190,000 new jobs. Consensus says the unemployment rate is 3.9 percent in July with a 0.3 percent gain in hourly earnings with average hours worked at 34.4. Second, the International Trade report expects the trade deficit in goods to widen slightly to 45.6 billion vs. the May reading of 43.1 billion. Then at 10:00 AM the ISM Non-Mfg. Index according to consensus will decline to 58.8 but continues to show exceptional strength. We a PMI Services Index report @ 9:45 and the Baker-Hughes Rig Count @ 1:00 PM to close out a very busy calendar week.
On the Earnings Calendar, the earnings reports slow down with just under 100 companies fessing up to their results. We have more than 1300 companies reporting next week so keep us on our toes.
Action Plan
After a substantial morning gap down the Bulls charged attempting to shake off trade war jitters and keeping traders off balance with the ship price action. As good as it was to see the Bulls defend, please keep in mind yesterdays rally let the indexes ver near resistance levels. Asian markets were mixed last night with European markets all slightly higher. Currently, the Dow Futures suggest a flat to slightly bullish open but keep in mind that could quickly change with a couple big market-moving Economic reports before the bell.
The choppy price action has been challenging, and that could continue with another big round of earnings next week. A,s you know, I like to reduce my weekend risk by taking some profits and avoiding adding new trades on Friday. However, you never say never and with so many reports now in the rearview mirror there are good opportunities as long as we can stay out of a trade war with China.
Trade Wisely,
Doug
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Trade War Jitters
The insipid price action of yesterday made for a day about as exciting as watching paint dry. Then after the bell, the White House stated that the President is considering raising tariffs by 25% on Chinese goods. Markets hate uncertainty and re-ignition of trade war jitters moved Asian and European markets sharply lower overnight. US Futures are currently pointing to a significant gap down which will beak important price support levels and current trends in the index charts.
If you have money at risk, there will likely be losses today. Try to avoid emotional decision such as chasing short trades or revenge trading. Often that will only serve compound the losses. Follow your trade plan and stick to your rules. Taking a loss is never fun, but it’s part of being in business. When is it good to take a $500 loss; When you have to take a $1000 loss later! Stay calm, focused and disciplined.
On the Calendar
There are two potential market-moving reports on today’s Economic Calendar. At 8:30 AM Eastern consensus expects a reading of 218,000 in Weekly Jobless Claims vs. 117,000 last week. Then at 10:00 AM Factory Orders forecasters expect a solid increase of 0.9 percent. We have the Natural Gas report @ 10:00 AM, two bond announcements @ 11:00 AM, the Fed Balance Sheet & Money Supply closing the calendar day at 4:30 PM.
On the Earnings Calendar, we have nearly 500 companies reporting earnings today to keep us on our toes. Make sure your checking date on stocks you own or are thinking of buying.
Action Plan
Yesterday’s price action was choppy and with a slightly bearish feel even after the FOMC decision not to raise rates this month. Asian Markets tumbled during the night after in response to the President’s consideration of raising Chinese tariffs by 25%. European markets are also sharply lower, and the US Futures are pointing to a gap down of more than 150 points as I write this.
I would suggest caution today as the market reacts to trade jitters and creates technical damage in the indexes by dropping through current support levels and trends. Obviously, a morning gap down like this can create a lot of emotion and traders see once profitable positions turn into losses. It stinks but its part of the business, and we have to roll with the punches and avoid making emotional decisions. This is not the market to rush in and buy the dip. Remain calm, focused and disciplined to your rules and trading plan.
Trade Wisely,
Doug
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A traders Edge
With the market facing a big day of economic reports, nearly 350 earnings reports and an FOMC interest rate decision, it will be difficult if not impossible to maintain a traders edge. Anything is possible and today might be better spent protecting your capital rather than pushing to take on new risk. Fat price action, reversals and intraday whipsaws are possible and could make for a very challenging day.
Remember the fear of missing out is a very strong emotion that can cause some for some very costly trading mistakes. Remember the quality of trades is more important than quantity and every day does not have to be traded to be successful. If you don’t fee you have a traders edge, then stand aside and protect your capital. There is no badge for the honor for charging forward blinding and watching your capital disappear. Do you have an edge today?
On the Calendar
Another busy Economic Calendar this Wednesday that gets going early with Motor Vehicle Sales expecting 17.1 million annualized rate in July. The ADP report at 8:15 AM expects a decline to 173,000 vs. the 177,000 in June, however, the actual government number came in 202,000. At 9:45 AM the PMI Mfg. Index expects to show 55.5 in July which is unchanged from last reading. Then at 10:00 AM ISM Mfg. Index expect to decline a slightly to 59.9 vs. 60.2 in June. Also at 10:00 AM is Construction Spending expecting a slight gain of 0.3 percent in June vs. the 0.4 gain in May. 10:30 AM brings the unforecast EIA Petroleum Status Report, but certainly has the power to move the market at times. Last but not least we will get the FOMC decision on interest rates at 2:00 PM.
On the Earnings Calendar, we have nearly 350 companies reporting results today.
Action Plan
I must admit I was hoping to see markets higher this morning in response to the positive earnings report from AAPL. However, with Asian and European market mostly lower the early Futures are pointing to slight gap down at the open currently. Keep in mind with a huge data dump of economic reports, pending FOMC decision on interest rates and nearly 350 earnings reports for the market to digest today anything is possible.
With most of the indexes hovering just above support levels we will have to watch price action closely for clues of change. After the morning rush, we could see the market become quiet and choppy as it waits for the FOMC decision. After the statement anything is possible, and there will linky be some fast price action as the market reacts. It will be very difficult to maintain a trading edge today, and it may be wise to restrict your trading activity or simply stand aside to protect capital. Remember you don’t have trade every day to be successful.
Trade Wisely,
Doug
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Tough Decisions
With so much data coming out today and the beginning of the FOMC meeting traders will have some tough decisions to make. Toss in after the bell AAPL earnings report with the power to gap the Wednesday open planning your risk becomes very important. A tough decision to be sure.
Asian and European markets had mixed results overnight, and although the Futures are currently pointing to a slightly bullish open a little fear is creeping into the market. I continue to suggest caution, especially for inexperienced traders. With so much data dumped on the market all at once remember that even the best of signals can quickly reverse so plan your risk carefully.
On the Calendar
We kick off a big day of potential market-moving reports. First, Personal Income and Outlays are expected to rise 0.4 percent with consensus suggesting the year-on-year rate of 2.3 percent. Also at 8:30 the Employment Cost Index is expected to rise 0.7 percent with the year-on-year number first quarter coming in at a ten year high of 2.7%. At 9:00 AM the CoreLogic Case-Shiller expects to show a monthly gain of 0.3 percent in home prices with the but the year-on-year number staying flat at 6.6 percent. The Chicago PMI expects a slight pullback in July to 62.3 vs. the 64.1 June reading at 9:45 AM. Finally, the Consumer Confidence report at 10:00 AM expect steady strength with a reading expected at 127.0 for in July vs. 126.4 for June. If that were not enough, we have the beginning of the 2-day FOMC meeting, Read Book @ 8:55 AM, Stat Street Confidence Index @ 10:00 AM and a Bond Auction @ 11:30 AM.
On the Earnings Calendar, we have more than 230 companies reporting so keep checking earning dates against companies you own and have a plan to protect yourself.
Action Plan
Yesterday was a bit nasty with NASDAQ stock under pressure pushing the QQQ down and testing a key level of support. The DIA, SPY, and IWM also came under selling pressure and raising concern that the current uptrend may soon end if the bulls don’t step in and support prices soon.
Currently, Futures markets are trying to put on a brave face indicating a slight bullish open, but with so many reports in both earnings and economic calendar, any is possible. I would suggest caution until we see clear signals from the bulls that the pullback is over. Remember, AAPL reports after the bell today and can move the market, so plan for the high probability of a substantial gap open on Wednesday. Also, keep in mind after the morning rush we could see choppy price action as we wait for the FOMC decision on interest rates.
Trade Wisely,
Doug
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Signs of Stress
The NASDAQ and Russell revealed signs of stress on Friday closing the day with bearish engulfing candles and breaking short-term supports. With the VIX showing signs of fear stating bubbling up it would be wise to approach the market with a little caution this morning. More than 1000 companies report this week volatility is likely to be high with fast price action, morning gaps, and intraday whipsaws.
If that’s not enough, we have a busy Economic Calendar which includes an FOMC meeting and a significant number of potential market-moving reports. Return your tray tables to their upright and locked position and make sure your seat belts are fastened securely because the odds of turbulence are high. Plan your risk carefully.
On the Calendar
Pending Home Sales will kick off the market-moving reports this week at 10:00 AM Eastern. Consensus suggests we will see an increase of 0.8 percent recovering from a 0.5 percent decline in May. We have Dallas Fed Mfg. Survey @ 10:30 AM, three bond events between 11:00 & 11:30 AM, with Farm Price at 3:00 PM to close the calendar day.
We have another really big week of earnings with Monday’s calendar showing 152 companies stepping up to report. CAT & L are among the reports before the bell with AABA & NTRI included coming in after the bell.
Action Plan
The DIA and SPY managed to hold on to their trends cling to current price support levels. However, the QQQ and IWM gave up short-term supports with big bearish engulfing candles that suggest at a minimum a lower low is possible today. Asian markets closed down across the board last night while European markets look to follow suit with the FTSE, DAX & CAC all lower this morning. Of course, anything is possible with so many companies reporting before the bell, but the US Futures are currently pointing to flat open.
With the Nasdaq and Russell clearly showing signs of stress and the VIX indicating an increase in fear I would suggest approaching the market with a little caution. A good round of reports this week could easily lift us out of danger, but with the indexes, so close to the edge, a few key reports could easily push them off. Keep a close eye on price action for clues and plan to see whipsaws and some fast price action as we wrap up July.
Trade Wisely,
Doug
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Defensive Stocks
Consumer defensive stocks have quietly risen out of bottom patterns over the last few weeks, and many of them showed a burst of bullish energy yesterday. I’m beginning to wonder if we’re starting to see a quiet institutional rotation toward safety with so many of tech stocks priced at or near perfection levels. Please understand I’m not making a prediction I’m only pointing out what I see in charts.
The current trends are still up, and the Bulls continue to hold onto control as the majority of earnings thus far have been positive. Like I always do I will be ringing the register and taking some profits to lower my weekend and risk. Next week is another huge week of earnings so rest up this weekend because we could be in for another wild ride next week. Remember to take a look at those defensive stocks.
On the Calendar
We start the Friday Economic Calendar at 8:30 AM Eastern with the GDP report. If consensus is correct, the President is going to get the reading on GDP that he wants with a four in front. GDP expects a very strong 4.2 as the first estimate of the 2nd quarter with Consumer spending rising 2.9 percent. Forecasters see Consumer Sentiment at 10:00 AM to come in unchanged with a solid reading of 97.1 in July. The Baker-Huges Rig Count will close out this light calendar day at 1:00 PM.
On the Earnings Calendar, we have nearly 80 companies reporting with the vast majority of them coming in before the bell. Some of the noteworthy are, XOM, PSX, CVX, WY, TWTR, CL & GT.
Action Plan
Overnight Asian markets finished the day mixed while Europian markets are rising across the board with the trade tensions now in the rearview mirror. AMZN reported well last night but INTC another tech bellwether disappointed the market and is indicated sharply lower this morning. Consequently, US Futures indicate a mixed open with Dow pointing higher and the Nasdaq flat to slightly lower. Of course, that could easily change as we move toward the open due to a large number earnings reports before the bell.
Friday’s are more of a take profits focus rather than adding new risk ahead of the weekend. Although it’s likely, I will stick to that pattern but never say never as there are always possible trades setting up. So far the vast majority of earnings reports have been positive even with the disappointments from some of the so-called FANG stocks. However, there still seems to be a bit of tentativeness in the overall market with so many stocks priced for perfection. There was a noted improvement in consumer defensive stocks yesterday which may be a clue to an underlying rotation to safety. I wish you all a fantastic weekend.
Trade Wisely,
Doug
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The market is currently presenting us with a difficult riddle. The Bulls and Bears appear equally matched as the indexes hover just below price resistance levels and record highs. Yesterday the Bears had an open invitation to push lower but lacked the conviction to get it done. On the other hand, the Bulls showed a willingness to defend current levels but also lacked the conviction to move up to test resistance. The riddle becomes even more complex with the current futures suggesting a flat open.
