Whiplash

With a sharp morning gap down and quick afternoon rally fueled by and FOMC surprise you may have a mild case of whiplash this morning.  At the end of the day, the major indexes managed to hold onto price supports but remain in a chop zone below resistance.  In other words, a wide range of consolidation fueled by political uncertainty making it very challenging for short-term traders caught in the whipsaw.

With more trade negotiation tremors likely and a holiday weekend just ahead the challenging price could continue so plan your risk carefully.  Also, keep in mind that we could soon experience lighter than normal volumes as traders take off early to extend their labor day weekend.

On the Calendar

We have a full Economic Calendar this Thursday, but there are only two reports with the potential of moving the market.  Weekly Jobless claims at 8:30 AM according to consensus will decrease by 2,000 to 220K and continuing to show very strong labor demand.  Then at 10:00 AM Existing Home Sales with a consensus annualized rate of 5.600 million will hold the strong gains of the last couple readings.  Other than that Consumer Confort index @ 9:45, Nat. Gas @ 10:30, Kansas City Mfg Indes @ 11:00, Fed Balance Sheet & Money Supply @ 4:30.  We also have Fed speakers at 10:45 AM and 2:00 PM along with 4-bond events today.

The Earnings Calendar shows 51 companies will report earnings today with BBY before the bell and GPS after the market close.

Action Plan

After a nasty opening gap down the bears seemed to have full control and continued to drive the market lower throughout the morning and early afternoon.  Then at 2:00 PM Eastern the FOMC surprised the market suggesting they were willing to allow inflation to rise above 2% sparking a sharp rally to close all four of the major indexes positive on the day.  If you feel your suffering from a little whiplash this morning, you’re not alone.

As I write this, the Futures are pointing to a flat open, but Economic new, and Earnings reports could quickly change that before the open.  With so much political uncertainty as trade negotiations, new reports send tremors through the market and facing a 3-day weekend I would not be surprised to see choppy price action with declining volumes after the morning rush.  Keep in mind that a lot of traders will likely extend their labor day with a few days of vacation.  Keep that in mind as you plan your risk into a holiday weekend.

Trade Wisely,

Doug

Tweet-storms an uncertainty.

Sadly yesterdays bullish attempt to break through resistance was unsuccessful amid presidential trade comments and Tweet-storms that continue to ruffle feathers.  The bad news is that the futures this morning are pointing to a gap down market open confirming the bearish engulfing patterns printed on all four major indexes.  The good news is that the 50-day moving averages and the current trend still hold the possibility of supporting price.

Unfortunately, as the trade negotiations continue the market will have to tiptoe on eggshells as we wait for a resolution.  Toss in the North Korean summit the North American trade negotiations and the FOMC minutes, and we have a pile of uncertainty likely to keep the market on edge.

On the Calendar

The hump day Economic Calendar has four potential market-moving reports.  The first is the 9:45 AM PMI Composite Flash which consensus expects the composite at 54.8, manufacturing at 56.5 and services at 54.6.  At 10:00 AM New Home Sales according to forecasters will slow slightly to a 677,000 annualized rate vs. the 694,00 April surge.  The EIA Petroleum Status report at 10:30 AM has shown a slow, steady trend of declining supplies helping to support rising oil prices.  Then at 2:00 PM is the FOMC minutes which may shed more light on the Fed’s thoughts regarding future interest rates.   Other than that we have 2-bond auctions at 11:30 AM and 1:00 PM followed by a Fed Speaker at 2:15 PM to complete the calendar day.

On the Earnings Calendar, there are 33 companies reporting today.  Among those before the bell is TGT and LOW with CPRT and NTAP fessing up after the bell.  Stay on your toes.

Action Plan

A disappointing day in the market after the White House expressed disappointment about the progress of the China trade negotiations.  Unfortunately, that left behind bearish engulfing candle patterns on all four major indexes.  The bearish engulfing requires follow through with a lower low print today to be valid, and sadly the Futures are pointing to a substantial gap down this morning.  Of course, the move lower and failure at resistance is a concern but if there is a silver lining, it would that indexes still have their 50-day averages and trend as support.  Let’s hope the bulls are strong enough to defend and the Tweet-storms subside.

Trade Wisely,

Doug

Two-sided price action.

It was of course very nice to the Bulls so inspired in the early morning session yesterday producing some very nice profits for the beginning of the week.  Unfortunately, after making a run at resistance levels, the price action became very two-sided and left behind candle patterns of concern rather than confidence.

Tucked up against resistance and printing possible topping candle patterns leaves a trader stuck in a bit of a quandary.  Is the door open to a path of profits or is it a trap door with just enough rope to hang yourself if you dare to wager a prediction.  I must admit I am holding on to hope that the bulls will find the energy to push through resistance but that hope will not prevent me from being ready if Bears ultimately wins the battle at resistance.

On the Calendar

An unusual second day in the row of no expected market-moving reports on today’s Economic Calendar.  The Redbook comes out at 8:55 AM Eastern, followed by the Richmond Fed Mfg. Index at 10 AM.  After that, two bond auctions are occurring at 11:30 AM and one at 1:00 PM.

On the Earnings Calendar, 50 companies are reporting their quarterly results.  Before-the-bell AZO, TJX, KSS, AAP and TOL.  After-the-bell,  INTU, and URBN may be noteworthy.

Action Plan

With a little uncertainty in the price action at resistance, it will be important to watch closely and have a plan for both a bullish or bearish move.  As this battle continues, it will be very important to remain flexible, unbiased and focused on price action clues.  The good news is that the early Dow Futures are pointing to another bullish gap this morning and perhaps indicating the Bulls have enough energy to follow through.

With the IWM suggesting the 6^th day up and another record high this morning I would watch this index closely for clues of a possible pullback at any time.  It may well serve as an early warning system for the overall market if a pullback does begin.

Trade Wisely,

Doug

Playing nice with each other.

The Bulls appear ready to leap the fence this morning gaping the Dow sharply higher with the other indexes following suit.  The media labeled, Trade War, was apparently called off as China and US officials playing nice with each other.  Big surprise, mutually assured destruction of economies was never the goal!

Although the market looks to open higher across the board, they still have significant levels of resistance to deal with just above.  The Bulls may have the inspiration to leap higher, but the question is do they have the energy to break through resistance.  Keep that in mind as you plan your trading day and be careful not to chase entries into resistance.

On the Calendar

The Economic Calendar has a full day scheduled for the Monday, but none of the reports are likely to move the market.  The Chicago Fed National Activity Index at 8:30 AM, 3-bond reports, and Fed Speakers at 11:30 Am, 2:15 PM, and 5:30 PM.

On the Earnings Calendar, we have 48 companies fessing up to their quarterly results.  Although earnings season is winding down, traders must always be aware of the earnings reports on companies you hold or at thinking of buying.  Failure to do so can lead to a very expensive lesson in planning and preparation.

Action Plan

News over the weekend that the US and China will play nice with each other and earnestly work to avoid a so-called Trade War has the bulls fired up this morning.  After only four days of consolidation, the Dow looks as if its ready to trade another run at 25,000.  Currently, the Dow Futures are indicating a gap up of more than 200 points with the other indexes leaping as well.

As exciting as it is to see the bulls inspired higher be careful not to chase and enter trades at price resistance.  Make the market and the stock you are considering for purchase prove they can not only breach resistance but hold it as support.  Years ago that was a major problem for me, and it cost me a lot of money and time.  I would get caught up in the morning hype, leap in with both feet and later realize I had entered positions almost exactly at the point of a pullback.  A pain lesion I hope you don’t have to learn the hard way as it did.

We should have some very nice profits this morning on our long positions.  Our two short positions that are holding some very nice gains will likely give back some of the gains, but as of now, the trade patterns are still valid if you choose to hold.

Trade Wisely,

Doug

Consolidation?

Once again the small caps manage to set new record highs.  However, the DIA, SPY and QQQ’s remain stuck between significant levels of support and resistance.  Currently, the Bulls and Bears seem equally matched and seem to have slipped into a tight range consolidation at least for the short-term.

Futures are pointing to a higher open but that open looks as if it will occur inside the range of the consolidation.  Perhaps one side or the other will be able to find some inspiration in the news, but I wouldn’t be at surprised to see another day of 2-sided price action.

On the Calendar

There is nothing on Friday’s Economic Calendar likely to move the overall market.  We have Fed Speakers at 3:00 AM,  and two at 9:15 AM.  Then at 1:00 PM is the Baker-Hughes Rig Count to close out the day.

The Friday Earnings Calendar only has eight companies reporting as 2^nd quarter earnings wind down.  However, there are two noteworthy reports from CPB and DE that happen before the bell.

Action Plan

Yesterday we saw a little 2-sided price action with the bulls and bears equally matched and settling into a narrow consolidation pattern.  With light days on both the Economic Calendar and the Earnings Calendar, the market may have to look for inspiration from the trade negotiations news.  Currently, the Futures are pointing to a bullish open, but the DIA, SPY, and QQQ all look as if they will open in the consolidation range.  After the morning rush, I would not be at all surprised to the price action become light and choppy as we head into a summer weekend.

As always my primary focus ahead of a weekend is profit taking rather than adding additional risk.  Of course, any trades that you plan to hold through the weekend should have thoughtfully places stop orders in place as well as hedges to the position or portfolio.  It’s been a fabulous week of profits so let’s keep that going right into the weekend.  I wish you all a wonderful weekend.

Trade Wisely,

Doug

Russell, New Record High!

Yesterday turned out to be very productive for current positions.  The Russell poked a finger in the eye of resistance breaking through to a new record high.  The SPY and QQQ had solid moves higher with the DIA lagging in more of a consolidation pattern.  Currently, the Futures are pointing to a flat to slightly lower open however that could quickly change with earnings reports and economic news.  Today is the Speaker Ryan’s imposed deadline on the North American Trade Agreement and the trade negotiations with China begin as well.

Although IWM set a new record high yesterday keep in mind the SPY, QQQ, and DIA remain under significant resistance levels.  As a result, we must watch for the possibility of reversal at or near resistance and prepare plans if the unfortunate event occurs.  Business requires planning and trading is a business like any other!

On the Calendar

Market-movers on today’s Economic Calendar are the Weekly Jobless Claims and the Philly Fed Survey both of which come out at before the bell at 8:30 AM Eastern.  Consensus estimates suggest Jobless Claims will increase to 215k vs. the last reading at 211k but continue to demonstrate a strong labor demand.  The Philly Fed Survey forecast is 21.0 for May vs. the April reading of 23.4 as it pulls back from a nearly 50-year record high.  The reports not expected to move the market, Consumer Comfort, E-Commerce Sales, Leading Indicators, Natural Gas report, 8-bond related events, Fed Balance Sheet, Money Supply and two Fed Speakers.

On the Earnings Calendar, WMT reports before the bell along with 40 other companies throughout the day.

Action Plan

As your planning for the day keep in mind that the SPY, QQQ, and DIA are still below significant resistance levels.  As they approach test these key levels, it’s important to stay focused on the price action.  No matter how much we want prices to break through resistance, we have to prepare for the possibility they could fail.  I think a consolidation in this area would be my personal preference to build energy one way or the other.  As you know what we want and what we get are two very different things, and as of now, Mr. Market has not called to ask me what I prefer.  Consequently, I have to remain unbiased and have a plan for all possibilities.

Trade Wisely,

Doug

Stuck in the Middle

With the indexes wedged between the significant levels of support and resistance, it reminds me of that old Stealers Wheel song, “Stuck In The Middle With You.”  The bears could easily take control and drive us down toward support, or the bulls could quickly mount another attack on resistance depending on which side finds the inspiration.  Pre-market earnings or economic new could easily provide that inspiration as could news on trade negotiations or the North Korean leader issuing threats.

So whats a trader to do?  Remain flexible and unbiased, stay focused on price action and have a plan ready for either direction.

On the Calendar

On this hump day, we have three potential market-moving reports on the Economic Calendar.  At 8:30 AM Eastern the Housing Starts consensus expect April starts to come in at 1.324 million annualized vs. 1.319 million in March.  New housing permits according to consensus will decline slightly to 1.350 vs. the 1.379 reading last month.  Industrial Production comes out at 9:15 AM and consensus expects a solid 0.6 percent gain with manufacturing growing by 0.3 percent.  Forecasters also expect Capacity Utilization of manufacturers to grow to 78.3 percent in April.  10:30 AM brings the EIA Petroleum Status Report is not forwardly forecast but has supported higher oil prices with U.S. reserves slowly declining.

There is a 7:00 Mortgage App. Report, a 10:00 AM Atlanta Fed Business Inflation expectation report and 2-Fed Speaker at 8:30 AM and 6:30 PM, none of which is expected to move the market.

The Earnings Calendar shows 55 companies reporting today with M coming in before the bell and CSCO after the market close.

Action Plan

After the morning gap down yesterday, the bears made a solid attempt to move the market lower but the bulls put in a very strong effort lifting the indexes of the low of the day before the close.  Unfortunately, DIA, SPY, and QQQ are currently floating about halfway between significant support and resistance levels so price could easily break in either direction.  Futures have been bouncing between a positive and negative this morning as it waits on early earnings reports and housing numbers to find inspiration.

With North Korea kicking sand at the U.S. and ongoing trade negotiations we need to remain flexible because just one news report could influence the direction of the market in about half a heartbeat.  Stay focused on price and have a plan for either direction today.

Trade Wisely,

Doug

Healthy Market

In the last couple morning notes, I have suggested a consolidation and or a pullback could begin at any time.  Not because I’m bearish but because that’s what a healthy market does.  It tests its boundaries and seeks out price support or resistance.  As a swing trader, I have learned to embrace consolidations and pullbacks because that’s good entries can be found.  However, as a trading coach, I often find that inexperienced traders fear the possibility of pullback rather than seeing it as the natural progress of price action.

It should be no big surprise the emotions of fear and greed are the normal cause.  Consider these two simple rules if you’re currently struggling with this problem.  1.  Only buy stocks that are at or near price support with a buy signal.  Don’t predict or anticipate the buy signal, wait for it to occur before entering.  2. Sell stocks (take profits) that or at or nearing resistance.  These simple rules helped me many years ago when I struggled with fear and greed, and if you build them into your trade plans I’m confident they will also help you.

On the Calendar

The Tuesday Economic Calendar gets started today will a Fed Speaker at 8:00 AM Eastern, and we have another one this afternoon 1:10 PM.  At 8:30 AM the biggest number of the day Retail Sales expects a moderate 0.3% according to consensus.  Also at 8:30 the Empire State Mfg Survey expects a 15.5 vs. the April report of 15.8.  Business Inventories at 10:00 AM forecasters see a modest 0.2 percent increase with sales slightly outpacing inventories.  Also at 10:00 the Housing Market Index expects home-builder confidence to come in flat at 69 even though home sales and permits are both accelerating.  The last of the potential market-moving reports is at 4:00 PM when Treasury Internation Capital reports it’s tracking statistics of financial instruments in and out of the United States.  Other than that we have the Redbook and a single bond auction to complete the calendar day.

On the Earnings Calendar, we have the last big of 2^nd quarter reports with nearly 250 on today’s docket to keep traders and investors on their toes.

Action Plan

Yesterday marked the 8^th day of the current Dow rally (up 68 points) that has seen the index rise more than 1450 points from last Thursday’s low.  Although a bullish day the indexes ended the trading slightly under pressure from profit takers leaving behind possible short-term topping candle patterns.  Futures are currently pointing to a slightly lower not helped by the sales miss in the Home Depot earnings report early this morning.  However, with the nearly 250 companies reporting today and a busy economic calendar topped by Retail sales, anything is possible.

After such a big rally a consolidation of the gains or a pullback to test support would be very healthy for the market.  However, let’s not assume the bulls will give up just because the indexes printed some topping patterns.  Remember candlestick patterns require follow to confirm them and with new record highs within reach on the QQQ’s and IWM the bulls find inspiration almost anywhere.  Let’s keep in mind the deadline for the North America trade agreement is Thursday, and the market could be very sensitive to the news and or the negotiated results.  As always stay focused on price action.

Trade Wisely,

Doug

Striking distance of 25,000

In the last 7-days of bullish price action, the Dow has recovered more than 1200 points and is now once again within striking distance of 25,000.  The questions now, do the bull have enough energy to punch through or will be bears defend this important psychological level as resistance.  The IWM is less than 1-point from making record highs, and the QQQ’s would only have to rise about 3.5 points to do the same.  Earnings continue to come in strong, and there are several big reports this week can certainly have the potential of moving the market.

We also have several big economic reports to consider this week and the likelihood of Trade Negotiations news adding in some nervous volatility.  So this week brings the bullish possibility of new records and bearish potential that the bears could defend price resistance.  With the Futures indicating a gap up open watch for the possibility of whipsaws as we get close to price highs.

On the Calendar

A light day on Monday’s Economic Calendar with only two Fed Speakers and three bond events which are unlikely to move the market.  Keep in mind that Retail Sales number are out Tuesday and Wednesday brings Housing Starts and Industrial Production numbers.

The Earnings Calendar for 2^nd quarter earnings begins to wind down this week, but Monday and Tuesday are still full days of earnings reports.   We have 188 companies reporting results today.  Although it’s winding down, there are still some big reports through the week such as DKS, HD, M, CSCO, WMT, and CPB.

Action Plan

If big earnings reports, retail sales numbers, and housing starts were not enough to focus on the market may also have politically generated trade jitters to deal with this week.  Speaker Ryan has imposed a Thursday deadline to complete the renegotiation of the North American Free Trader Agreement.  The new agreement is largely expected to be market positive, but according to reports completing their work by Thursday’s deadline may not be possible.  Also, trade negotiations between the U.S. and China are scheduled to begin this week, which obviously has the potential to create some market shock waves.

Currently, futures suggest a bullish open with the Dow gapping up more than 50 points.  On Friday the Dow closed within striking distance of 25,000, but I would not expect this resistance to break easily.  After a 7-day winning streak, don’t be surprised to see some profit-taking or price consolidation to begin at any time.  The IWM is close to an all-time-high breakout, and the QQQ’s are also nearing price highs.  If the bulls have the energy, it is also possible to see some new records set this week as long as the political news doesn’t upset the apple cart with trade jitters.  Although I took some profits and hedged some positions last week, I will remain bullish until the price action tells me otherwise.  There are a lot of very nice charts to choose from but be careful not chase.

Trade Wisely,

Doug

Don’t make the mistake of Chasing.

After a six-day winning streak, the futures are currently suggesting a moderate gap up at the open today.  The market has given us a great week of profits, but we don’t make the mistake of chasing this late into the rally and just ahead of the weekend.  As the indexes approach important resistance levels, I’m much more inclined to capture gains rather than add new risk as we enter the weekend.

As a matter of fact, members watch as I took profits yesterday afternoon as the market continued to power higher capturing gains that many would have to work a month to earn in a regular job.  The point is don’t allow greed to prevent you from taking a profit and doing your job as a trader.  Remember quality trades are much more important than quantity.

On the Calendar

The Friday Economic Calendar gets going at 8:30 AM Eastern with a Fed Speaker and the Import-Export Prices report.  Forecasters expect imports to rise 0.5 percent in April while Export prices will grow by 0.3 percent.  AT 10:00 AM consensus expects Consumer Sentiment to tick higher in April with a strong reading of 99.0.  Last but not least is the Baker-Hughes Rig Count at 1:00 AM which is not expected to move the market.

On the Earnings Calendar, there is a big drop in the number of reports with only 43 companies ready to fess up today.  Next Monday and Tuesday are pretty big days with around 400 points between them but after that 2^nd earnings season begins to wind down.

Action Plan

Yesterday the Dow and SPY showed considerable strength pushing higher after breaking above the 50-day average just the day before.  The QQQ’s powered higher as the IWM nears the all-time highs for the average.  As I write this, the futures are suggesting a gap up open which will make the seven straight days of gain is the DIA,  SPY, and QQQ.  If you’re not already long, I would now caution you not to chase as we are nearing significant levels in the indexes.

It’s been a great week of gains I will be more focused mostly on taking profit as we head into the weekend.  The big challenge for the market now is to prove the bulls are strong enough to hold these key levels of support.  The bulls are in control and could most certainly push hard enough to close the week with 7-straight days of gains, but it would also not be that surprising to see profit taking ahead of the weekend.  Keep in mind gap up opens can easily be seen as an opportunity to sell into strength to capture gains.  I wish you all a great day and a fantastic weekend.

Trade Wisely,

Doug