Getaway Day
Combine Friday and the last trading day before Christmas, and you might hear volume sucked out the market. Today is the perfect storm for a Getaway Day for the long weekend. As always there will likely be a flurry of opening activity, but after that, expect very light volume chop. Monday the market is closed, and I would not be at surprised to light volume next Tuesday as traders extend their vacation. If your not planning to take the day off then work on your trading plan for next year. Review your past trades and look for ways to improve. Clean your watchlists and prepare shopping lists for next year. It’s also a very good time to study new techniques or strategies to improve as a trader. I wish you all a Very Merry Christmas!
On the Calendar
The last day of trading before Christmas see an Economic Calendar with several important reports. At 8:30 AM Eastern is the Durable Good Orders which consensus sees increasing by 2%. Even after excluding transportation orders are expected to increase by a solid gain of 0.5% with the core number growing by 0.4%. Also at 8:30 AM is Personal Income and Outlays which income is seen rising 0.4% and consumer spending up 0.5% with the holiday boost. At 10:00 AM is New Home Sales is expecting a decline from October’s 685K vs. Novembers 650K. At 10:00 AM is Consumer Sentiment that is expected to remain very strong with a consensus estimate of 97.0.
On the Earnings Calendar, there are only six companies expected to report today now of which are particularly notable.
Action Plan
The Bulls found a little inspiration yesterday gaping up and pushing higher during the day. Unfortunately, the last hour of the day saw some significant profit taking once again confirming a reason for caution. Currently, the uptrend is still intact, and the VIX showed no rising fear. Futures are currently positive removing the possibility of a government shutdown by passing a CR that’s good through January 19, 2018.
After the morning rush, I expect today’s volume to drop faster than the Times Square New Years Eve ball. Although I will be at my desk, I will not be doing any trading other than maybe taking some profits.
Trade Wisely,
Doug
A mistake often made.
As we head into Christmas and the New Year, I feel compelled to remind you that not every day is a good day to trade. A mistake often made by short-term traders is thinking they have traded just because they happen to be sitting in front of their computers. It’s a painful lesson I learned the hard way. There are times to trade aggressively, and there are times that it’s much wiser just to stand aside. Quality of trades is far more important than quantity of trades. I know it seems sounds cliché’, but less is quite often more. Market volume is likely to remain sub-par between now and the first of the year. If you do decide to trade, make sure you have a well thought out plan and are willing to endure a lot of choppy price action.
On the Calendar
Today the Economic calendar is overflowing with reports but only three that have the power to move the market. First at 8:30 AM, is the very important GDP number. Consensus says the overall number will stay unchanged at 2.1 % with consumer spending remaining unchanged as well. Weekly Jobless claims which are also at 8:30 AM are expected to come in at 234K a slight decline of 1000 from last week. Then we get the Philly Fed Business Outlook, also at 8:30. Consensus for December has the outlook coming in with a slight decline at 21.8 backing way from a 48-year high.
On the Earnings Calendar, we have just over 20 companies reporting today some that could have a market impact. Noteables before the bell are CAG, KMX, RAD, and PAYX. After the bell, we will hear from CTAS, NKE, and CAMP.
Action Plan
Sellers were quick to respond the yesterdays 100-point-gap with profit taking. After reaching price support level in just a few minutes after the open volume died on the vine and we slipped into choppy action. As of now, there is no technical damage to the overall trends, but there is certainly reason to elevate caution. Dow futures are currently pointing to a slight gap up open but keep in mind that could quickly change. We have 3-important economic reports and some earnings that could easily make the open better or worse in the blink of an eye.
As for me, heading into a long holiday weekend, I plan to avoid adding any additional risk. Anything can happen over long weekends, so I’m more likely to seek the security of being in cash. Of course, I’m only talking about short-term holdings; with long-term trades, I will stay the course. After the morning rush, I expect volumes to diminish quickly. Choppy directionless price action could easily dominate the majority of the day. With the new year only a few days away it just seems foolish to risk giving back the any of the fantastic profits in a low volume market.
Trade Wisely,
Doug
Short Santa!
Yesterday’s price action left some reason for cautiousness. Three of the four major indexes left behind bearish candle patterns. How dare they Short Santa! The truth is love shorting because of the very quick money made during a panic move. However, for retail traders, we have to be very careful about predicting market tops and jumping to early. Been there, done that and have a lot of battle scars to remind me of the big losses that can occur when trying to predict. Unless you are willing to endure nasty whipsaws and being run over in a short squeeze, don’t short a trending market! If you think the market is failing then stand aside and wait for it to prove. It’s the big boys that will decide a top, not retail traders. Once they make that decision, it will be very obvious, and we will have plenty of time to participate. Try to predict and get eaten by the sharks.
On the Calendar
The hump day Economic Calendar gets doesn’t get going until 10:00 AM Eastern with Existing Home Sales. Existing sales increased in October 2.1 percent to a 4.870 million rate. Forecasters are expecting, even more, strength. December consensus expects a 5.550 million reading. At 10:30 AM we get the EIA Petroleum Status Report which is not forecast but has shown a trend of rising supplies and concerns about overall demand.
On the Earnings Calendar, we have 20 companies expected to report today. Notable before the bell is GIS and WGO but after the bell keep an eye on BBBY. Don’t get caught by an earnings event. Always check reports against your portfolio!
Action Plan
After a gap up open, the bulls decided to take a siesta and allow the bears to have a little snack. The DIA, SPY, and IWM left behind bearish engulfing candles, and the QQQ joined in to slide south as well. Although caution is warranted, the futures have been signaling all night that a follow through move down will be challenged by the bulls. Perhaps it’s due to the Tax Reform bill passing the Senate or the good earnings reports from FDX and MU. However at this point but the bulls don’t seem ready to give up just yet.
If the futures continue to show strength into the open those who got short early could get trampled under by stampeding bulls. I’m not sure there is enough short interest to trigger a full on short squeeze, but you never know. Equally possible is that the gap up open could be meet with some very hungry bears. Stay on toes and focus on price action clues. Remember Congress will have to act quickly on a budget to prevent the government from running out of money midnight Saturday. The spin doctoring in the new could easily toss the market around so don’t dip into that eggnog just yet. It’s also important to note that with the holiday weekend fast approaching volumes could quickly decline so plan accordingly.
Trade Wisely,
Doug
Dow 25,000?
The bulls appear to have limitless energy to drive the market higher. Is Dow 25,000 in the cards? With Congress likely passing the Tax Reform bill today and the VIX indicating No Fear it certainly seems possible. Exciting, yes, but let’s not get too overconfident or complacent. Let’s remember we are still facing a government closure this weekend unless Congress can get their act together and pass a budget. A failure to do so would likely send shock waves through the market so stay focused on price and have a plan if the tide starts to go out. It would also be wise as you plan the rest of the week that volumes may quickly begin to decline as traders take off for Christmas. A trade may look perfect, but without volume, it can’t move and do you want to be holding a lot of open positions over the holiday. Something to ponder as you look ahead and assess the risk.
On the Calendar
Tuesdays Economic Calendar kicks off at 8:30 AM Eastern with the Housing Starts Report. October saw a sharp acceleration with starts up 13.7% with permits up 7.4%. Forecasters expect November to moderate with starts coming in at 1.240 million annualized vs. 1.290. Permits pullback slightly to 1.270 million annualized vs. 1.316 in October. After that, we have a couple of reports unlikely to move the market, a bond auction, and a Fed speaker at 1:10 PM.
On the Earnings Calendar, we have just over 30 companies reporting today. After the bell, a couple of earnings report to take note of is RHT and MU. Continue to reinforce the good habit of checking earnings dates on the stocks you own or are thinking about buying.
Action Plan
New closing record highs across the board on the major indexes yesterday. If I heard it correctly, the Dow has amassed 85 new records so far this year. What an amazing year! While the markets continue marching higher, the VIX is once again testing historical lows. Fear of a market correction at least for now is not at all on the mind of traders and investors. The Tax Reform bill is likely to pass today, and then Congress has to deal with the pending government closure coming this weekend. We could see some volatility due to the D.C. news cycle as a result so stay on your toes. Complacency is dangerous!
As of now, the futures are pointing to a small gap up open. At the open, the Dow will likely be less than 150 points from a 25000 print. Can the bulls get it done this week? We have some bigger earnings reports after the bell today that could certainly help if they report well. As for me I will continue to trade long positions with the overall trend and will continue to look for new trading opportunities. However, I will also need to keep in mind that volumes could quickly begin to diminish as Christmas draws near. Plan accordingly.
Trade Wisely,
Doug
Christmas Gift
With the promise of Tax Reform passing Congress today the futures are wildly bullish. The President, of course, will quickly sign the new bill into law bringing a huge Christmas Gift to the market. After the morning gap up the Dow will be in striking distance of a 25,000 print. I would be surprised it the 25K hats, and t-shirts are ready printed and just waiting under the trading desks. Earnings this week from, FedEx, Micron, RedHat, General Mills, Carmax, ConAgra, Nike, and Cintas could be just enough rocket fuel to propel the market higher. Anyone caught short will experience significant pain this morning and will likely get squeezed out this morning. Expect higher volatility and prepare for quick price action.
On the Calendar
Monday’s Economic Calendar is a light one with only the Housing Market Index report at 10:00 AM Eastern. Home builders have been reporting gains in confidence as new home sales have been rising in recent months. Forecaster sees the December index holding at steady matching the 70 reading in November. After that, all we have is a bill announcement and a couple of bill auctions.
On the Earnings Calendar, we only have 11 companies stepping up to report results today. Most notable today are CCRC and LEN which both report before the bell.
Action Plan
Friday’s market highlight reel would have to focus on the sudden strong move in the tech sector. The QQQ’s reached out to a new record high close and regained market leadership. The SPY and the IWM both had good days but ran into some profit-taking the last hour of trading ahead of the weekend. Trends continue up, and the Bulls remain solidly in control.
With a weekend of wrangling, it seems Congress is finally ready to vote on the Tax Reform bill. According to reports they now have the votes so they can comfortably pass the bill. As a result, Futures are flying high with the Dow futures pointing to more than a 100 point gap up at the open. Big gap up opens at market highs are dangerous to chase due to the possibility of a so-called blow-off top. They are also often subject to violent whipsaws so don’t get caught up in the drama and chase. At the open, the Dow will only be about 200 points from a 25,000 handle. With some big earnings coming out this week, I there is a very real possibility the energy will be there to drive it up to that level before the end of the week. I also think we could see an extra dose of volatility so plan carefully.
Trade Wisely,
Doug
News of a Vote
Yesterday we saw some selling on worries the Tax Reform bill would not get finished up. This morning sentiment quickly changes as news of a vote and passage could happen as early as today. I hate politically driven markets because as retail traders our edge simply disappears into the spinning black hole of the news cycle. Futures are not pointing to a significant gap up that will put a lot of pressure on those that got short early. Let’s keep in mind that a Dow 25,000 print is not that far away so don’t expect the bulls to give up easily. Perhaps the passage of tax reform is all the fodder needed to encourage the bulls to push higher. I think the road ahead could be a bit bumpier than we have seen this week. Plan carefully and remember to take profits.
On The Calendar
We kick off this Quadruple Witching Friday Economic Calendar with the Empire State Mfg. Survey at 8:30 AM Eastern. The survey has been running very hot all year which some have warned is at unsustainable levels. Consensus sees a December decline to 18.0 vs. Novembers 19.4 reading. At 9:15 AM is Industrial Production which forecasters see gaining 0.3% in November. We have a couple of mid-day reports that are unlikely to move the market and then Treasury Internation Capital at 4:00 PM that has no forecast.
On the Earnings Calendar, we only have 12 companies reporting none of which are particularly notable. However, have a plan if you happen to own one of these companies.
Action Plan
The market found some sellers yesterday across all 4-major indexes due to the uncertainty surrounding the Tax Reform bill vote. Both the DIA and the SPY left behind bearish engulfing patterns, and I suspect many began to predict a market top placing short positions. During the evening we heard that the conference revised Tax Reform bill will likely get a vote as early today. Plenty of time for the President to sign off on before year-end assuming it passes. Consequently, the futures are responding with bullish glee and early short traders are likely to feel some pain.
Up to this point, this last rally has seen very little volatility, but I would not be surprised to see that change very soon. As we head into the weekend, I normally am more of a profit taker than one looking for additional risk. That’s not likely to change today but never say never. Price is King, and I will follow price action that sets up a good opportunity for profit.
Trade Wisely,
Doug
Big News Day
I have to admit that I was somewhat surprised that yesterdays FOMC announcement turned out to be such a non-event. The market just yawned and saw nothing to react too. Today is another big news day with some big after the bell earnings reports tossed in for good measure. The Bulls are firmly in control buy at the end of the day yesterday price action suggested a little weariness and maybe a rest in the rally is possible. With all the news the market will have a lot to chew on and potentially react so stay on your toes. In an all bull market it’s very easy to become complacent because you can buy almost anything at anytime and the rising tide makes you money. Guard yourself against complacency by staying focused on the only thing that really matters, Price! The clues will be there if you watch and listen to the market.
On the Calendar
We kick off the Thursday Calendar with the weekly Jobless Claims at 8:30 AM Eastern. The after-effects of Hurricane Maria are expected to continue to impact initial claims with a rise to 239k vs. 236k. Also at 8:30 AM is the Retail Sales numbers which are expected to see the core rate rise by a solid 0.4%. To finish the 8:30 AM data dump is Import and Export Prices where forecasters see imports rising 0.7% with exports only increasing 0.3%. At 9:45 we get the PMI Composite a reading above 50 indicates manufacturing growth while a sub-50 print points to a decline. Business Inventories comes out at 10:00 AM and forecasters see a 0.1% draw-down in inventories which is considered bullish. After that, we have a few non-market-moving reports and bound announcements.
The Earnings calendar show just over 30 companies reporting today. There are several big noteworthy reports after the bell such as ADBE, COST, ORCL & JBL.
Action Plan
The strength and longevity of this current rally is a bit spooky but also very impressive. Spooky because the DIA has managed to leave behind gaps 5-days in a row, and impressive in breadth. Once again new records were set in the DIA and the SPY. A 25,000 Dow print is now only 325 points away, and the bulls seem very determined to get it there. However, with the late afternoon selling yesterday across all indexes perhaps a little rest in this bull march is possible. There is a big economic data dump today as well as several big earnings reports after the bell so the market will have a lot reaction worthy events today.
Currently, futures are once again suggesting a gap up in the Dow, and the VIX continues to register little to no fear. There is no denying that the trend is up and the bulls are in control. As a result, I will stay long and continue to look for long trades as long as that condition exists. Long ago I learned the hard way that trading my bias, predicting market turns and fighting the market was a losing business model! However, that does not mean we should be complacent and toss caution to the wind. Stay focused on price, listen to the market and be flexible enough to adapt if a change appears.
Trade Wisely,
Doug
Mixed Signals
The four major indexes left behind mixed signals yesterday even as new record highs printed. Unsettled price action ahead of the FOMC is not a surprise but couple that with market highs and the uncertainty meter maxes out. Toss in a political upset that could threaten the tax reform plan, and policy going forward we could see some turbulent price action. During major news events, we lose our edge. Candle signals, price patterns, support, resistance, and trend are no match if the market becomes emotional. Please understand I’m not suggesting that it will become emotional only that the possibility exists. When we trade without an edge, it’s no different than standing at a roulette wheel betting on red or black. My focus today is on preserving profits and protecting capital rather than adding risk.
On the Calendar
The hump day Economic Calendar begins at 8:30 AM with the Consumer Price Index. Forecasters see the overall CPI rising 0.4%, with 0.2% taking out food and energy. Year-on-year, the CPI is seen rising 2.2% with the core at 1.8%. At 10:30 AM is the important EIA Petroleum Status Report that last reading showed a build in supplies and raised questions on demand. Of course what the market is really waiting for is the FOMC Announcement & forecasts at 2:00 PM. Everyone is expecting a rate increase however the forecast could be the wild card if additional rates increase are expected next year. At 2:30 will be Chairman Yellen’s final FOMC press conference.
On the Earnings Calendar we have about 30 companies reporting results, but once again I don’t see any market-moving reports. Please keep checking reporting dates!
Action Plan
Yesterday the market left behind a mix of signals, but uptrends are still intact. The DIA and the SPY both made record highs yesterday but found some sellers in the afternoon session. The SPY printed a possible topping shooting star pattern by the close day raising a little uncertainty. The QQQ’s chose to rest with a spinning top doji, and the IWM headed south with a bearish engulfing however still above support. A little uncertainty ahead of the FOMC announcement & forecasts is not that unusual, but the fact it’s happening at a market high should raise a few caution flags for today.
I’m expecting a choppy day up until the FOMC at 2:00 PM then anything is possible. Expect very fast intraday price action after the announcement with the possibility of whipsaw reversals that could continue through the press conference. I won’t rule out new trades today but will say it would be very unlikely due to the loss of edge around a new event such as the FOMC. Although the Futures have pointed to bullish to flat open, I would not be at all surprised to see some selling this morning to capture profits ahead of the unknown. If the Bears do come out to play, I will not hesitate to bank some profits.
Trade Wisely,
Doug
Waiting for the Fed
Waiting for the Fed. After this FOMC meeting, we will likely be bidding farewell to Chairman Yellen. As her final act, she will likely leave us with an interest rate increase. That’s not a surprise the FOMC has been projecting that possibility for months now. However, there is speculation she could leave us with a nasty surprise on Wednesday in response to the Tax Reform bill. Many are thinking the FOMC could project additional interest rate increases next year as a result. Currently, they are projecting just three. Any additions could make for an interesting market reaction at tomorrow. Plan accordingly. Also, keep in mind that as the market waits for the official FOMC statement price action normally becomes light and choppy. As we reach out for new all-time highs, it would be wise to keep that in mind as you plan the path forward.
On the Calendar
The beginning of the FOMC meeting tops the Economic Calendar today and will weigh on the mind of the market. At 8:30 AM Eastern is the PPI report which consensus suggests will once again show an increase of 0.3%. Food prices are also expected to show in an increase of 0.2%. We have a couple of bond auctions mid-day and then close the calendar with the Treasury Budget at 2:00 PM. I doubt that its any surprise that the deficit continues to rise now expected to top 134 Billion.
The Earnings Calendar indicates 28 companies will report earnings today with the majority of them coming after the bell. Make sure you always know about and have a plan for companies you hold that are reporting. A little effort can save you a lot!
Action Plan
Another day of record closes for the DIA and SPY as steady grind higher. The DOW is only 600 points from that big round number of 25,000. I suspect that’s a headline the market would like to see. In fact, I would bet they already have the hats and t-shirts printed in anticipation. The QQQ’s ended the day yesterday showing nice strength making a record high attempt look possible again. The Russell decided to largely take the day off and chose not to participate in the Bull Party.
This morning the Futures are once again pointing to small gap up open. The VIX- continues to fall and is once again approaching record low territory. An 8-handle print is only 34 points away which is amazing to me considering the elevation of the market. With up-trends intact on the overall market, I will continue to look for long trades with low-risk entry points. I will also stay very focused on price action looking possible reversal points as the DIA and SPY stretch out for the all-time high print. Keep in mind the FOMC meeting begins today and a slow, choppy market is often the result as we wait.
Trade Wisely,
Doug
Are you still trying to predict?
With the Dow Futures pointing to a gap up open and the VIX once again dropping below a 10-handle all is well in the market. Or is it? Let’s keep remember; it was just a week ago that many were calling a blow-off top! The truth is no one knows the future and thinking we can predict it is nothing more than ego trampling common sense. However, if set aside our bias focus on price and listen closely, the market will whisper clues and allow us to take calculated risks. Otherwise know as trade planning! Not just some of the time, All the Time. each and every trade! So the questions is, are you listening or are you still trying to predict? With a gap up to new market highs, the market is whispering to me to avoid chasing this morning and watchful of possible whipsaws. Also with the FOMC on Wednesday, choppy boring price action could lie ahead.
On the Calendar
The Economic Calendar this week kicks off at 10:00 AM Eastern with the JOLTS report. Job openings have been running very strong. In September JOLTS counted 6.093 open jobs around the country. The consensus for October sees that number increasing to 6.100 million. We round out the remainder of the calendar with bond announcements and auctions.
Ther are 18 companies on the Earnings Calendar expected to report results. A quick look and I don’t see any that is particularly notable or likely to move the market. However,r if you now one them they certainly have the power to move your account. Make sure to check as part of your daily planning.
Action Plan
Last Friday saw the both the DIA and SPY make new record high close while still below the high print. The QQQ gapped but ran into some sellers at price resistance as did the IWM. Overall the day was bullish leaving behind a lot of really good looking charts. Maybe it’s just me, but the price action seemed to lack commitment or perhaps it’s just a little tentative ahead of the FOMC this week.
Futures opened bullishly and currently seems to have strengthed that sentiment into the pre-market session. The CBOE kicked off trading in Bitcoin futures last night, and the overall market appears to be completely twitterpated by an intangible one and zero digital currency. It will certainly be interesting watch which I intend to do from the safety of the sidelines. It will not be a surprise if the market becomes slow and choppy after the morning rush today. Keep in mind the FOMC is expected to raise interest rates on Wednesday. Also be on the lookout for whipsaw price action as we test market highs.
Trade Wisely.
Doug
