The FOMC

The North Korean agreement in the rear-view mirror the market can focus on the FOMC.  The odds of a rate increase are very high, but the big question is will the FOMC stop its balance sheet reductions early?  At 2:00 PM Eastern tomorrow we will know the answer, until then its only speculation.  If the FOMC does surprise the market with a change in policy, there will likely be a significant reaction in price.  It may be wise to consider your risk and how much you are willing to hold ahead of the announcement.

Tensions between the US and Canada on trade negotiations seem to be growing with our leaders seem unwilling to play nice with each other.  Needless to say, any news that improves or worsens the trade negotiation process could quickly move prices.  The market hates uncertainty so stay focused on price action for clues and remain flexible.

On the Calendar

Topping the Tuesday Economic Calendar is the start fo the June FOMC meeting which will culminate with their Announcement and Forecast at 2:00 PM Eastern tomorrow.  At 8:30 AM Eastern we get the latest reading on the Consumer Price Index where forecasters expect the core rate up 0.2 percent and the Year-on-year up three tenths to 2.8 percent.  The Redbook is at 8:55 AM then two bond auctions at 11:30 AM and 1 PM.  The Treasury Budget comes out at 2:00 PM and is expected to show a deficit of 144.0 billion according to forecasters.

A light day on the Earnings Calendar with just 25 companies reporting earnings.  Notable earnings before the bell is LE with HRB reporting after the market close.

Action Plan

With a historic agreement signed to denuclearize North Korea the market has now turned its attention to the war of words between the US and Canada and the FOMC meeting that kicks off this morning.  Futures are currently pointing to a slightly lower open but should not be too big of a surprise considering the Dow has gained nearly 1000 points in just over a week.  Keep in mind; it was just nine trading days ago the Dow was treating to fail of the 50-moving average.  Both the Dow and SPY left behind possible topping candle patterns at price resistance points suggesting a little caution might be in order.

As we wait for the FOMC decision, it’s not uncommon for the market to become a bit anemic on volume with choppy price action.  However, considering the sharp rally and the jitters over trade negotiations some profit-taking would not be out of the question.  I will be watching price action closely today and will likely take some profits to reduce risk before the FOMC announcement.

Trade Wisely,

Doug

A lot on its plate.

With trade negotiations seemly on shaky ground and a Wednesday afternoon, FOMC interest rate decision looming the market has on its plate as we begin this trading week.  On the positive side, the four major indexes are in current up-trends with the momentum favoring the bulls at the moment.  Speculation that the FOMC could end its balance sheet reduction program earlier than expected also favors the bulls because the market loves a relaxed FOMC policy.

On the negative side, we have all the political jitters of shaky trade negotiations and the upcoming summit with North Korea.  The market hates uncertainty and as world leaders continue a public battle of words the market is justifiably nervous of about the possible outcome.  Politically driven markets are challenging because they can suddenly reverse overnight.  Have a prepared plan, try to say flexible and unbiased and focused on price action for clues.

On the Calendar

There are only bond announcements and bond auctions on the Economic Calendar today.  The begin at 11:00 AM Eastern and close out the calendar day at 1:00 PM.  They are of course very unlikely to move the market.

On the Earnings Calendar, we have only 38 companies reporting results today, and I don’t see any that would market-moving reports.  However, make sure your checking earnings dates against current holdings and have a plan to deal with the risk.

Action Plan

After a bumpy G7 where it looks as if trade negotiations in the North American agreement have taken an ugly turn for the worse.  However, with speculation that the FOMC may stop reducing its balance sheet much sooner than expected appears to have evened out the market jitters.  Currently, the Dow Future’s are pointing to a flat open, but with all the political uncertainty brewing traders should be prepared for just about anything.

With the DIA, SPY, and QQQ all at or near new levels of price resistance, traders will have stay focused on price action for clues.  Momentum currently favors the Bulls, but after such a strong rally last week it would not be a big surprise if profit takers begin to step in at any time.  The trend of the overall market continues to be bullish thus a consolidation or light pullback that holds the trend could easily attract more Bulls.  With trade war jitters and an FOMC meeting interest rate decision on Wednesday afternoon, traders will have to stay flexible.  Remember the market has three directions of possible movement; up, down or sideways.  Light choppy price action would not be out of the question as we wait for the FOMC decision.

Trade Wisely,

Doug

Politically Charged Weekend

As we head into the uncertainty of a politically charged weekend its easy to become frustrated when we experience overnight reversals such as the one we’re likely to experience this morning.  Yes it frustrating but we should also be very grateful for the fantastic profits this weeks rally provided.  We saw new record highs in two indexes with the other two finally found the energy to break through key resistance levels.  All and all a really good week of trading.

With the 2-day G7 meeting about to begin in the midst of trade negotiations, it’s not a big surprise that the market is a bit apprehensive ahead of the weekend.  Directly after the G7 meeting, the president travels to Singapore for the North Korean summit.  Plan your risk carefully as we head into the weekend.

On the Calendar

We have a very light day on Friday’s Economic Calendar with no expected market-moving reports.  At 10:00 AM is the Wholesale Trade report, and the Baker-Hughes Rig Count is at 1:00 PM closing the calendar day.

The Earnings Calendar is also light today with only 13 companies reporting earnings today with AMED being one of the most notable after the bell.

Action Plan

We closed the day yesterday with some clues that the current market rally could be running out steam.  The candle patterns left behind suggest a little caution that a consolidation or market pullback could soon begin.  Unfortunately, caution seems to have flown directly into a TweetStorm as France and the US square off ahead of the G7 meeting in Canada.

As I have mentioned before, political uncertainty creates one of the most challenging environments for traders.  With the G7 meeting, this weekend followed directly by the US-North Korean summit; there is plenty of political uncertainty facing the market ahead of the weekend.  Currently, the Dow Futures are suggesting a gap down of more than 100 points.  Protect your profits and plan your risk carefully as we head into the weekend.

Trade Wisley,

Doug

Dow breaks through 25,000

About 90 minutes in the trading day yesterday a small flame began to burn in the Dow that quickly grew into a huge bullish fire pushing the index higher and the Dow breaks through 25,000.  At the end of the day, there were new record highs in the QQQ,’ and the IWM and the SPY surged higher as well.

Asian and European markets also posed gain overnight, and the current futures suggest a little bullish follow through at the open with a modest gap up this morning.  After such a strong recovery rally it would not be out of the question to see some profit taking begin at any time so be careful not to chase at the open.  The Bulls could also just as easily ride the momentum wave higher today so stay focused on price action.  Yesterday was a very good lesson that price action is king and predicting is a losing proposition.

On the Calendar

The Thursday brings us a full Economic Calendar but only one possible market-moving report at 8:30 AM Eastern.  According to consensus Jobless Claims expect a reading of 225,000 this week, an increase but continues to show strong labor demand.  After that, we have the Consumer Comfort Index @ 9:45, Quarterly Services @ 10:00, Natural Gas @ 10:30, five bond Announcements, Consumer Credit @ 3:00, Fed Balance Sheet & Money @ 4:30 to end the calendar day.

On the Earnings Calendar, we have 46 companies reporting earnings with SJM before the bell and AVGO after the close.

Action Plan

After the morning gap up the market seemed to stall for about 90 minutes.  The QQQ and SPY started to show a slight weakness, and then the lagging Dow Index began to catch a bid igniting a very strong rally.  After cutting through the resistance at 25,000, there was a skirmish between the Bulls and Bears just above 25k, but in the last 30 minutes of trading, the Bulls gained the upper hand index advanced another 100 points.  The buying was infectious spreading across all of the indexes with the QQQ’s & IWM once again setting new record highs.

If there ever was a good lesson in staying focused on price action and avoid prediction, it was yesterday.  Asian and European markets joined in on the bullish celebration also posting gains overnight.  Consequently, the futures are once again pointing to a gap up open this morning more than 50 points.  And once again I will caution you about chasing the gap and staying focused on price action.  Profit taking could begin at any time so have a plan to protect those tasty profits the market has provided during this fantastic recovery rally.

Trade Wisely,

Doug

Another Victory for the Bulls

After closing at new records high in the QQQ’s and IWM yesterday futures currently suggest yet another bullish open this morning.  Even though the DIA and SPY close the day flat, I consider that a victory for the Bulls as they held on to Monday’s strong performance.  Although there are lots good charts, If your not already in this rally I would caution you not to chase.

The fear of missing out is a very strong emotion that every trader has to overcome.  If you miss an entry, it’s usually better the just let it pass then to chase into the trade.  I can tell from painful experience that chasing often has the trader entering at or near the point when the stock pulls back.  Instead of chasing, mark up the chart put it in a watchlist and wait for the next entry signal.  As long as a stock maintains, a trend there will be more opportunities to profit.

On the Calendar

There are three potential market-moving events on Wednesday’s Economic Calendar.  At 8:30 AM Eastern we get readings on both International Trade & Productivity and Costs.  Forecasters expect the international trade deficit for goods and services to hold steady in April at $49.0 Billion.  Productivity is expected to grow 0.7 percent with unit labor costs up 2.8 percent vs. the 2.7 reading last month.  At 10:30 AM we get the latest reading on Petroleum Supplies which have no forward forecast.  Other than that we have a reading of Mortgage Applications at 7:00 AM and Treasury STRIPS at 3:00 PM but are unlikely to move the market.

On the Earnings Calendar, we have 46 companies reporting quarterly results.  Among them are SIG which reports before the bell and FIVE reporting after the close.

Action Plan

Yesterday we saw both the DIA and SPY chop sideways ending the day about where they started.  After such a big move on Monday, I view this a win for the Bulls.  The QQQ’s closed the day at a new record high as did the IWM which is showing impressive strength and leading the overall market.  During the evening Asian and European were both bullish giving the US Futures an overnight boost.  As I write this Dow Futures are pointing to a gap open of nearly 100 points, but that could certainly change as earnings and economic data come out.

While I remain overall bullish, I’m watching price action closely for clues pullback or profit taking as this rally matures.  If the QQQ’s open positively as the futures currently suggests, it’s the 7^th straight day of gains a reason to watch for signs of profit taking.  As the QQQ’s and IWM gap up to new record highs, be careful not to chase stocks late there run.  Go Bulls!

Trade Wisely,

Doug

The economy is humming right along.

With last weeks numbers indicating the economy is humming right along with strong jobs growth and wage increase, the Bulls seem ready to mount attacks on resistance levels.  The European concerns have passed at least for now, and the US and North Korea summit is back on the schedule.  This weekend the President will travel to Canada for the G7 Summit where there could be some tensions after leveling new tariffs on steel and aluminum on them last week.

Trade negotiations on the North American Free Trade Agreement and with China will likely continue to send shock waves through the market over the next several weeks, but Bulls currently seem inspired to move higher with a substantial gap up open to begin the week.

On the Calendar

The Economic Calendar this week gets going at 10:00 AM Eastern with Factory Orders.  According to consensus, the durable good report expects orders to slip 0.4 percent in April.  After that, there is Bill Announcement, two Bill Auctions, and the TD Ameritrade IMX report to close the calendar day at 12.30 PM.

Earnings Calendar

The Earnings Calendar shows 32 companies will report today to keep traders on toes with the most notable PANW after the bell.

Action Plan

With the Jobs number coming in strong and real wages increasing the Bulls found the inspiration they needed to move higher on Friday.  International concerns in Italy and Spain have subsided, and it appears the summit with North Korea is back on for June 6^th.  Trade negotiations will once again take center stage and continue to weigh heavily on the market particularly with the President traveling to Canada this week.

Currently, the Dow Futures are pointing to more than a 100 point gap up at the open.  After breaking resistance on Friday, the QQQ looks ready to attempt a new record high in the near future.  The SPY is set to gap above resistance at the open today with the IWM leaning the way looking to post a new record high at the open.  As always be very careful not to chase gap up opens as they can often create nasty whipsaws.  Having said that, the Bulls do seem set to gain some control as long as trader negotiation jitters remain in check.  Go Bulls!

Trade Wisely,

Doug

Bulls stepped up.

With Euro jitters fading (at least for now) the bulls stepped up to the plate yesterday in a show of strength.   Holding the DIA and SPY 50-day average is vital if we hope to see additional price improvements in the market.  The IWM moved with great confidence yesterday once again posting record high as it reacted bullishly to support.

These bullish moves in price still face key resistance levels as political uncertainty continues to swirl.  Today the White House is expected to decide on steel and aluminum tariffs affecting some important trading partners.  Obviously, the market is sensitive to this issue and react swiftly to the decision so keep a close eye on price action and prepared to react.

On the Calendar

The Thursday Economic Calendar starts with the Weekly Jobless Claims and Personal income and Outlays at 8:30 AM Eastern.  Consensus suggests the weekly claims will come in at 224,000 a full 10K decline from last week.  Personal income expects a moderate 0.3 percent in April with consumer spending is expected to increase 0,4 percent.  Exclude both food and energy, and the core index expects only a 0.1 percent increase to 1.8 percent annual reading.  At 9:45 AM the Chicago PMI is expected to rise to 58.4.  Then at 10:00 AM forecasters expect Pending Home Sales to increase 0.4 in April as more homes come to market helping to boost sales.  The EIA Petroleum Status reports is the last of the market-moving reports this morning and in not forwardly forecast.  We have two Fed Speakes today at 12:30 PM & 8:30 PM along with two bond events and several non-market-moving reports to close the day.

The Earnings Calendar shows 63 companies reporting today with AEO, DG, and DLTR before the open.  After the bell, we will hear from COST, LULU, and GME.

Action Plan

After the sharp morning gap up the bulls found stored reserves of energy pushing the markets sharply higher as Euro Jitters dissipated for the time being.   Trade will be on the mind of the market today as the White House may decide to move forward on steel and aluminum tariffs.  Currently, Futures are pointing to a flat to slightly lower open but with a big day of economic reports and several earnings events that could quickly change.

As our current positions continue to extend gains, make sure you are adjusting stops to protect profits.  Don’t let greed get in the way of taking profits as political uncertainty continues to swirl on trade negotiations, North Korea and the Euro.  The DIA, SPY, and QQQ continue in consolidation between key support and resistance levels.  Breakouts or failures of these key levels could create some fast price action so watch closely.

Trade Wisely,

Doug

Political Uncertainty

The summer market not only has to deal with the political uncertainty of US trade negotiations but now also has to worry about the future of the Euro as Italian uncertainty shakes the market.  With the newly elected officials struggling to form a government Italy may face another election that threatens the stability of the Euro.

All this political uncertainty could make for a challenging summer with prices whipping around in a politically generated storm where the outcome has far-reaching market effects.  Yesterday the faced a triple point gap down and selloff and this morning the futures suggest a triple point gap up at the open.  Plan your risk carefully and prepare for the possibility of more turbulence in the weeks to come.

On the Calendar

The Wednesday Economic Calendar gets going at 8:15 AM with the ADP Employment Report consensus at 187,000 new jobs created in May.  The ADP has been running stronger than actual payrolls.  AT 8:30 AM we have tow potential market-moving reports, GDP & International Trade in Goods.  Forecasters expect the GDP to come in at 2.2 percent with consumer spending up slightly and the GDP index unchanged at 2.0 percent.  International Trade in Goods deficit is expected to widen to a consensus $71.0 billion in April vs. $68.3 in March reading.  The Beige Book at 2:00 PM which comes out 2-week before the FOMC will wrap up the potential market-movers for today.  Other reports today include Mortgage Applications, Corporate Profits, Retail inventories, Redbook, and Farm Prices.  Keep in mind that the Fed will issue a proposal to modify the Volcker Rule which curtailed proprietary trading banks after the financial crisis.

We have 56 companies reporting earnings today to keep traders on their toes.

Action Plan

Political uncertainty in Italy shock the markets on Tuesday sending banking stocks sharply lower with the stability of the Euro in question.  It would wise to expect further shock waves to the market similar to those we experienced just a couple years ago with Greece.  Unless they sort this out quickly, we could face a turbulent summer.

This morning the Dow Futures are pointing to a gap up open of more than 120 points as the market whips around in political winds generated in the US and now across the pond.  The VIX rose sharply yesterday facing uncertainty on multiple fronts.  Plan your risk carefully!

Trade Wisely,

Doug

Bears say, Howdy.

With everyone was enjoying a long weekend it would appear this morning the bears want to say howdy and mount an offensive.  The normal culprit, US political uncertainty, does not seem to be the cause of the bearish move it seems to stem this morning from our friends across the pond.  European indexes are lower with another extension request on the Brexit as a possible culprit.

Nonetheless, the Futures are pointing to a substantial gap down of more than 150 Dow points breaking below the consolidations support and adding another possible resistance level.  With the DIA and SPY now so close to their 50-day averages a test of this key level now appears more likely.  There is no need to panic, but there is a reason to raise your caution level.  As always stay focused on price action and remain disciplined to your rules rather than letting emotion dictate business decisions.

On the Calendar

Although it’s only a four day work week, the Economic Calendar will be a busy one with a bunch of potential market-moving reports.  Today we get things kicked off at 9:00 AM CoreLogic Case-Shiller as forecasters expect a slight decline to 6.4% vs. the February reading of 6.8%.  At 10:00 AM the Consumer Confidence will remain strong according to forecasters that expect May to come in at 128.1 holding on to this year’s gains.  After that, we have State Street Investor Confidence at 10:00 AM, Dallas Fed Mfg Survey, and 3-bond auctions to round out the calendar day.

On the Earnings Calendar among the 51 companies, a room favorite of late MOMO will report before the bell today.  After the market close, we will hear form HPQ & CRM.

Action Plan

It was not a surprise to see Friday’s price action so anemic and choppy.  Unfortunately, it also gave us no clues the big gap down open we currently see this morning.  Currently, the Dow Futures suggest a gap down of more than 150 points following declines in European markets during the night.  If the bearishness holds through-out the morning the DIA, SPY will gap below last Thursdays low and the consolidations price support.  The IWM is currently indicated to open below the support of the breakout to new highs created on the 16^th.

If there is a silver lining this morning, it’s the fact that all the major indexes currently remain above their respective 50-day averages and are at this time still holding onto the up-trend.  With such a violent move at the open, it’s easy to make poor emotionally based snap decisions.  As always watch the price action closely and follow your trading plans.  At this point, a test of the 50-day seems likely; the big question is will this key level hold?

Trade Wisely,

Doug

Choppy Consolidation

After a lot of moving around reacting to the consolation of the North Korean Summit the market ended the day about where it started and still in consolidation.  With the long holiday weekend ahead expect very light volumes and choppy price action.  Currently, the futures suggest a slightly bullish open, but I highly doubt it will find enough energy to attack overhead resistance or move lower to test support.

There are times to trade than there are times its more productive just to do other things.  Today is likely going to be the latter.  I wish you all a wonderful 3-day weekend.

On the Calendar

The Friday Economic Calendar kicks off at 8:30 AM Eastern with the Durable Good Report which according to consensus will remain strong even though they expect it declined 1.2 percent.  Ex-transportation the number should see a small gain of 0.6 percent and core capital goods could be up 0.7 percent in April.  The Consumer Sentiment number out at 10:00 will remain strong according to consensus with a print of 99.0.  We have one Fed Speaker at 9:20 AM, and three speaking at 11:45 AM.  To close the calendar week, the Baker-Hughes Rig Count is out at 1:00 PM.

A light day on the Earning Calendar with only 15 companies reporting with FL being one of the most notable.

Action Plan

Dipping sharply after the cancellation of the North Korean Summit indexes managed to recover ending the trading day about where it had begun.   If today were a normal day, I would take that as a possible bullish signal but with a holiday weekend just around the corner, not so much.  Futures suggest a slightly bullish open, but I think we can expect volume to drop like a rock after the morning rush as traders head out for the long weekend.

With so much political uncertainty brewing in the trade negotiations I plan to go into the weekend light in my account and avoiding the urge to add any new risk.  The major indexes are in a consolidation range, and I think finding enough volume to change that today will be near to impossible.  Maybe the best course of action is to fire up that grill and get the weekend started early.

Trade Wisely,

Doug