Psychological Boost

Yesterday was a big psychological boost for the market and a great day for the Bulls with all four fo the major indexes finally above their 50-day averages.  Now comes the important task for the Bulls to hold on to this key support level.  The inflation data in the CPI report this morning could easily serve as the catalyst to inspire the Bulls higher or bring out the bears if the number comes in hotter than expected.

It may be wise to keep an eye on the 10-Treasury for directional clues this morning.  Should the 10-year break above the prior high of 3.033 the markets are likely to view that negatively.  Currently, the market expects the Fed will raise rates by 25 basis points in June with the possibility of two more this year.  A hotter than expected number could easily raise speculation that the Fed will become more aggressive and add a 3^rd increase.  Of course, I’m rooting for the bulls to win the day but I will have a plan to protect profits and capital should the CPI bring out the bears.

On the Calendar

Today at 8:30 AM Eastern we get two potential market-moving reports, but the CPI may well prove to be the most important report of the week.  Consensus expects an April headline monthly gain of 0.3 percent with the core rate gain of only 0.2 percent.  The year-on-year rates are both expected to rise by just one-tenth to 2.5 percent overall and 2.2 percent for the core reading.  Also at 8:30 AM is the weekly Jobless Claims which consensus expects to come in at 220,000 up 9,000 and just above a 49-year low.  Then at 2:00 PM the Treasury Budget according to forecasters will see a surplus of 88.0 billion due to the tax big tax season.

Today marks the last very big day on the Earnings Calendar for this season with 391 companies stepping up to the plate.  However, that does not release us from checking reporting dates on the companies we own or are thinking about buying.  Next weeks calendar show about 500 companies will report.

Action Plan

Today I think it would be wise to keep an eye on the CPI number that comes out an hour before the market opens at 8:30 AM eastern and has the power to determine the short-term market direction.  If the number comes in hotter than expected the 10-year treasury bond could easily rally above 3% which would likely move the market lower.  A pop above 3.033 would technically be a new high and could trigger speculation of an additional rate increase this year.  If the CPI were to come in cooler than expected, then the market may gain some energy to push higher.

Yesterday was a great day for the market with all four of the major indicators above their 50-day averages.  Now the question is, do the bulls have the energy to hold this important level of support?  The answer to that question could be in the CPI report.  As I write this Futures are suggesting a flat open, but that could easily change based on the large number of earnings this morning and how the inflation data is received.   Plan your day accordingly.

Trade Wisely,

Doug

Futures pointing higher.

Now that the US has officially left the Iran nuclear agreement markets around the world are responding higher.  Perhaps not the catastrophic event the media spin was alluding to, at least for now.  With Futures pointing higher the Dow and SP-500 poised to break the above their 50-day averages at the open.  A very welcome site if you happen to be bullish.  Getting above this important level is one thing,  now it’s up to the bulls to prove they can hold it as support.  Something they have been unable to do since early February.

Although inflationary pressures continue to creep up economic data continues to show remarkable strength in the economy.  With the majority of earnings reports continuing to come in strong perhaps the bulls will find the energy to hold on this time.  As we head into summer, I would not expect the market to reclaim the glory of the 2017 rally, but it would be nice to see it stabilize and settle in above this key support.  There is still a lot of resistance above that will have to be dealt with but holding above the 50-day average would be a good start.

On the Calendar

The Economic Calendar on this hump day has two potential market-moving reports.  At 8:30 AM Eastern the PPI report expects a 0.3 percent in April for the headline number.  Excluding food and energy forecasters see a 0.2 percent increase and 0.3 percent increase if you also exclude trade services.  The EIA Petroleum status report has seen a short-term trend of declining supplies which in turn has helped support rising oil prices.  There is no forward forecast of oil supplies, so it’s always a true market surprise.  The remaining events on the calendar include 7:00 AM Mortgage Applications, 10:00 AM Wholesale Trade, and two 1:00 PM Bond auctions, none of which is expected to move the market.

On the Earnings Calendar, I show 371 companies stepping up to report quarterly results.

Action Plan

Yesterday the market traded in a tight range as it seemingly waited for the Presidents decision on the Iran Nuclear deal.  Oddly enough after we learned the US would be pulling out of the deal, there was still a very little reaction as the market seemed content to rest another day.  The DIA and SPY both closed the day just below their 50-day averages while the QQQ’s and the IWM found the energy to hold above as the market seemed to be struggling to make a directional decision.

This morning the Dow Futures are suggesting a substantial gap up of more than 100 points with both Asian and European markets trading bullishly.  It would seem the US leaving Iran agreement is of little concern to the markets at this point with the bulls pushing for higher prints.  If the futures remain strong through the rest of the morning, the DIA and SPY look to break the resistance of their 50-day averages.  The question now is can the bulls hold this important support which they have not been able to do since early February.  Here to hoping they can!  Remember with so many earnings reports still to come that fast price and volatility are still possible.

Trade Wisely,

Doug

Considerable uncertainty.

Overall yesterday was a win for the bulls following though from the big rally last Friday.  However, with the DIA and SPY leaving behind doji patterns just below the 50-day average, they left us considerable uncertainty as well.  Although the Tech’s and small caps closed strong the question on everyone’s mind, will that be enough to fend off a bear attack?

Currently, the futures are pointing to a lower open, but with political news pending and a huge number of earnings reports, anything is possible.  I think traders should exercise a little caution this morning until some better price action clues appear.

On the Calendar

There is only one market-moving report on today’s Economic Calendar.  There was a Fed Speaker at 3:15 AM, the NFIB Small Business Optimism at 6:00 AM, Redbook at 8:55 AM and two bond events at 11:30 AM & 1:00 PM.  The potential market-moving JOLTS (job openings) expects to see a slight increase in March to 6.100 million vs. February’s 6.052.

We have another big day on the Earnings Calendar with 420 companies stepping up to report today.  Make sure you’re checking your holdings against expected earnings reports.

Action Plan

We begin Tuesday with a  little uncertainty, after printing doji patterns below the 50-day average on the DIA and SPY.  To make it a bit more confusing the QQQ and IWM managed close bullish and above their respective 50-day averages.  Struggling at this important resistance is not that big of a surprise, but we certainly but it now becomes imperative for the bulls to step up and fend off a possible bear attack.  A day of rest would be perfectly acceptable, but we don’t want to see failure patterns on the DIA and SPY at the end of the day.

Currently, the futures are pointing to a lower open of more than 50 Dow points however with so many earnings reports this morning anything is possible.  I would suggest a little caution this morning as the bulls and bears battle for control.  If holding some unrealized gains make sure you have a plans to protect them because failure here could easily embolden the bears to seek new market lows.  Let’s go bulls it’s time to step up!

Trade wisely,

Doug

Not out of the woods just yet.

The bulls went to work on Friday providing very nice relief rally, but the markets are not out of the woods just yet.  The big move in AAPL fueled by the huge share purchase by Waren Buffett helped the QQQ’s break above it’s 50-day moving average.  However, all four of the major indexes are still in technical downtrends with significant price resistance levels above.  Although the Futures are pointing to a bullish open, keep in mind that after such a big 2-day rally some profit taking would not be out of the question.

The market has a lot to chew on this week with trade negotiations, nuclear deals, North Korea and about 1400 earnings reports.  Price volatility is likely to remain high, and big whipsaws or reversals are not out of the realm of possibility amidst the new spin cycle.  I’m rooting for the bulls to win this battle but I will also have a plan if bears regain control and everything starts moving south.

On the Calendar

A quiet day on Economic Calendar for a change.  There are three bond events, the TD Ameritrade IMX, Consumer Credit and three Fed speakers none of which are typically market-moving.

On the Earnings Calendar, there are 219 companies reporting quarterly results.  Today begins the last big week of this earnings season with around 1400 companies reporting.

Action Plan

Friday’s big beautiful bullish follow through was a very welcome site and was quite broad-based.  The tech sector turned out the be the biggest winner after the news that Warren Buffett when on another spending spree in AAPL shares.  That boost propelled the stock price to new record highs and due to its heavy weighting in QQQ pushed the ETF’s price above the 50-day average.

Unfortunately, the DIA and SPY remain under the 50-day average which means the bulls have a lot more work ahead of them.  Keep in mind the indexes still have a lot of overhead price resistance to deal with, and all four indexes are still in down trending patterns.  I wouldn’t expect the bears to give up easily and with the Dow, over 700 points off the low printed on Thursday, some profit taking is not out of the question.  The good news is that currently, the Dow Futures are suggesting a positive open.  The bad news is that the Dow will have to rally more than 230 points to test the 50-day averages and more than 550 points to break the lower high resistance.  Possible yes, but a tall order when you consider China Trade negotiations, a North Korean talks, and the Iranian Nuclear deal that could easily present stumbling blocks.

Trade Wisely,

Doug

Insipid

If you listen to the financial news, they blame yesterdays 300 point Dow selloff on Trade War jitters.  Okay,  if that’s the case what changed midday to cause the rally that recovered the entire selloff to close the day up 5 points?  If I were to define the price action in a single word, it would be Insipid, (no vigor).  The bulls are certainly lacking vigor unable to find buyers even on strong earnings reports.  And although we are in a current downtrend, the bears also seem lacking conviction allowing intraday whipsaws and reversals to occur almost daily.

The fact is after the unprecedented run up last year that overpriced the market this is a very normal process of trying to renegotiate prices.  Admittedly it’s extremely frustrating and very challenging to trade.  With the DIA and the SPY holding on to their 200-day averages yesterday I would love to say it now over but honestly I don’t think that true.  Although we may get a relief rally, I think the chances of difficult price action through the summer months is a high probability.  The good news is money can still be made with good technical analysis and selective stock picking.  The big intraday swings will eventually diminish, and the technical analysts will rule supreme.  There may be fewer trending stocks to choose from, but the quality of a trade is always more important than quantity.

On the Calendar

Only one market-moving report and a parade of Fed Speakers for this Friday’s Economic Calendar.  Before the bell at 8:30 AM Eastern we will get the very important Employment Situation report.  Consensus expects the April nonfarm payrolls grew by 191,000 in April with the unemployment rate slipping 1-tenth to 4.0 percent.  Average hourly earnings will tick up by only 0.2 percent with the yearly rate holding steady at 2.7 percent.  The forecast also expects manufacturing payrolls to post solid growth of 15,000.  The workweek is seen unchanged at 34.5 hours with the labor participation rate coming in flat at 62.9.  The oil rig count is at 1:00 PM and there are 7 Fed member speaking engagements throughout the day to close the calendar week.

On the Earnings Calendar, there are 95 companies expected to fess up to their results today.  Next will is another huge week of earnings with around 1400 expected reports to keep us on our toes.

Action Plan

No matter how if you were a bull or bear yesterday was frustrating because the market does not seem capable of holding on to a direction for an entire day.  The Dow dropped 300 points in the morning and then rallied about the same in the afternoon.  After all that movement it ended the day flat.  A frustrating whipsaw to be certain.

The good news – The DIA and the SPY ultimately held the 200-day-average and printed a Hammer Candle Pattern.  The bad news – A Hammer Candle Pattern requires follow-through, and currently, the futures are pointing to gap down open.  Couple that with the fact the bulls have not been able to find buyers even on great earnings reports it tough to believe in them enough at this point to toss caution to the wind and buy this low.  With the weekend coming and the news whipping up trade war fears it might be wise to exercise some caution.

Trade Wisely,

Doug

Rising Concern

Good earnings reports, no interest rate increase and the bulls don’t seem to care.  I don’t know about you that is becoming a serious concern to me.  With the DIA and the SPY once again dipping toward the 200-day-average I’m becoming increasingly concerned that bears could seek a retest of the April lows or possibly lower.  With the Futures pointing to a flat open and the bulls seemingly unable to respond to good reports traders should be on high alert.  A failure below the 200-day-average could embolden the bears to launch a full assault to find the next level of support which on the Dow could be more than 500 points lower.

I don’t intend to sound all bearish because it is still very possible for the bulls to launch a defense but they have better get to it pretty darn soon.  As always stay focused on price action for clues.  It’s certainly okay to hope for the best as long as you have a plan to protect your capital form the worst.  Personally, I think the market is near a critical decision point that could define the course of the next several months of trading.  Be prepared.

On the Calendar

We have a busy day on the Economic Calendar with five potential market-moving reports, three of which come out together at 8:30 AM Eastern.  According to consensus, the International Trade deficit is expected to decline to $49.9 billion in March vs. the February print of $57.6 billion.  The weekly Jobless Claims expect labor demand to remain strong but see claims increasing to 224K this week.  Productivity and Costs report expects to show a modest increase in first quarter production of 0.9% annualized but also see labor costs increasing 3.0%.

At 10:00 AM Factory Orders expects March durable goods orders to increase 1.3 while capital goods orders point to a slowing in business investment.  Also at 10:00 AM ISM Non-Mfg Index, according to consensus will hold a very strong rate of 58.4 in April vs. the March reading at 58.8 as delivery times have been increasing due to capacity constraints and labor costs.  The remaining reports on the calendar, Consumer Comfort, Natural Gas, Fed Balance Sheet, Money Supply and Bond Announcement are unlikely to move the market today.

Today is also a big day on the Earnings Calendar with more than 400 companies expected to report.  Stay vigilant and keep checking reporting dates of companies you hold and have a plan to avoid painful earnings surprises.

Action Plan

In my 29 years of market experience, yesterday’s FOMC market reaction to unchanged interest rates ranks among the most boring.  When the bears did finally step in it was a slow and grinding decline with the DIA and SPY dipping toward a test Tuesday’s low.  The QQQ dipped but held more than 50% of Tuesday’s rally while the IWM pushed upward closing above its 50-Day-Average.  Overnight Futures were negative but currently are suggesting a flat open.

It’s interesting to note and concerning as earnings continue to come better than expected with no interest increases from the FOMC that the bulls have been unable to gain any traction.  The 200-Day-Average fast approaching once again the bulls had better get it together quickly, or we should expect the bears to make a run for the April lows and perhaps lower.  As of now, the VIX is not showing a sharp rise in fear but keep a close eye on it because a failure below the 200-day could easily open a floodgate of bearish sentiment.

Trade Wisely,

Doug

The Humbling Market

The market has a way of humbling us all.  Yesterday I suggested we would likely see a big gap up or a big gap down as a result of AAPL earnings.  AAPL produced great earnings, sales, guidance and huge stock repurchase program after the bell yesterday.  The stock currently is gaping up 4% in the premarket and all-though the Dow Futures are pointing to a gap up open it’s not what I would call a big gap.  Although I still think I was right to be cautious ahead of such big focused event, it wrong of me to try and predict how the market would react.  A lesson that has repeatedly humbled me over the last 28 years of trading.

As always it’s the big institutions with their trillions of dollars that will decide the direction of a stock and the overall market.  Our job as retail traders is to identify the clues they leave behind in price action and follow their lead rather than trying to predict the future.  It’s far less stressful and much easier to build consistency into your trading when we remain humble and simply follow price action.

On the Calendar

Today’s Economic Calander have three potential market-moving reports.  First, the ADP Employment report at 8:15 AM Eastern is estimating the economy created 191,000 new jobs in April.  The unforecast Petroleum Statis report at 10:30 AM has shown the US supplies declining of late helping to support oil prices.  Then at 2:00 PM is the biggest event of the day occurs when the FOMC releases their decision on interest rates.  Other than that we have a couple of reports and three bond events all of which are not expected to move the market.

Another big day on the Earnings Calendar with nearly 350 companies reporting results.  Stay on your toes.

Action Plan

AAPL does it once again releasing considerable pressure in the tech sector topping estimates and selling more than 52 million iPhone’s last quarter.  They also announce an additional 100 billion in stock repurchases to put a cherry on top for investors.  The question is, with this giant weight lifted, can the tech sector stocks get moving in response to so many strong earnings reports?  Only time will tell.

Now we move on to the FOMC rate decision at 2:00 PM.  After the morning rush, it’s pretty normal for the market to become slow and choppy as we wait for their announcement.  Expect extremely fast price action on the release of the decision which often delivers several whipsaws before finally establishing a direction.  Currently, the Fed Funds Futures place about a 95% chance of a rate increase of 25 basis points today.  The big question is will the statement become move toward the hawkish side now that the Economic targets established by the FOMC have been achieved?

Trade Wisely,

Doug

AAPL in focus.

There is an old saying,” with great power comes great responsibility.”  Not many companies ever wield the power that the tech behemoth AAPL.  So with the overall market struggling to find its footing, I guess it’s fitting that the AAPL earnings report could be responsible for reversing or confirming market direction.  Suppliers of this tech giant have raised speculation that orders of chips and displays have declined by as much as 50% begging the question, will AAPL miss earnings estimates?  If the company reports better than expected, expect a gap up Wednesday morning, however, and AAPL miss will likely produce a sizable gap down.

As soon the fireworks over the AAPL report have subsided the market will turn its focus the FOMC announcement at 2:00 PM Eastern time on Wednesday.  With such big hitters coming up to bat I would not be at surprised to see choppy price action today as the market waits holding its breath and hoping for a positive outcome.  Get ready for a wild ride.

On the Calendar

The FOMC begins its 2-day meeting on this first day of May Economic Calendar.  The PMI Manufacturing Index, out at 9:45 AM, expects to come in unchanged at 56.5 in April but continues at multi-year highs.  The biggest number or the day, ISM Mfg Index, come out at 10:00 AM and according to consensus will decline slightly but remains strong in April coming in at 58.6 vs. the 59.3 March reading.  Also at 10:00 AM is the Construction Spending report which forecasters expect to grow by 0.5 percent in March.  A 4-week Bill Action will close out the calendar day at 11:30 AM.

Another big day of earnings reports with just over 260 companies on the calendar.  Stay on your toes and keep checking reporting dates for the companies you hold or those you’re about to purchase because there are more than 800 reports yet to come this week.

Action Plan

An unpleasant day on Monday as the market served up a classic Pump and Dump leaving behind a lot of bearish candle patterns.  The DIA, the SPY, printed Bearish Engulfing patterns that are unfortunately showing a failure at the 50-day SMA.  The QQQ followed through to the downside confirming Friday’s failure of the 50-day SMA.  The IWM joined the party yesterday with a bearish engulfing pattern breaking its 50-day average after working so hard to hold it last week.  Earnings reports by-in-large continue to come in strong, but sadly profit takers continue to overpower buyers reacting to the good results.

Although there are over 260 companies reporting today all eyes seem to focus on just one, AAPL.  The tech giant is weighed heavily in not only the QQQ but also the DIA and SPY.  AAPL reports after the bell today and could reverse or confirm the current market downtrend.  It would be wise to plan for a market gap up or down Wednesday morning.  If that were not enough drama, the market must turn its attention to the FOMC announcement at 2:00 PM Eastern time.  Buckle up this could be a very bumpy ride.

Trade Wisely,

Doug

Strong Earnings performance.

A slight decline in rates coupled with strong earnings performance gave the bulls want they needed to recover a good deal of the Tuesday sell-off.  While the relief rally produces some very nice profits for us, we must recognize the significant resistance that lies above on the DIA, SPY, and QQQ.  With the GDP expected to show a decline in the 1^st quarter the bull may find it difficult to drive higher ahead of the weekend.  Even if the numbers come in better than expected, it would not be out of the question to see some profit-taking after the 2-day Dow rally of nearly 500 points.  Also, keep in mind there are 100 companies reporting earnings today, so continue to expect fast price action and watch for the possibility of reversal with such strong resistance above.

On the Calendar

We get things going on the calendar with the very important GDP report at 8:30 AM Eastern.  According to forecasters, the GDP should come in at 2.0 for the first estimate of the 1^st quarter vs. 2.9 in the 4^th quarter.  Consumer spending is expected to sharply decline to a 1.1% rate vs. the very strong 4.0% from the 4^th quarter.  The GDP price index is expected slightly higher at 2.4%.  Also at 8:30 AM, the Employment Cost Index, is also expected to tick higher to 0.7% for the 4^th quarter reading vs. 0.6% in the 3^rd quarter of last year.  Consumer Spending comes out at 10:00 AM expects a decline to 98.0 vs. the 101.4 reading in March which was a 14-year high.  The Oil Rig count come out at 1:00 PM and Fram Prices at 3:00 PM but are not expected to move the market.

The Earnings Calendar now shows 100 companies that will report today to close our a huge week of earnings.  However, don’t relax just yet because next week is also a very big week on the earnings calendar.  Keep checking and stay on your toes.

Action Plan

With such a nice rally yesterday I would love to sound the all-clear siren, but the truth is all we have done to this point is to rally back into a zone of resistance.  After making significant strides to recover the Bulls now face a tough level of price resistance and the 50-day moving average.  Great earnings out of AMZN, INTC, and MSFT after the bell may offer some help, but currently, the Futures markets are pointing to a lower open.

Lately, Friday’s have experienced profit taking as traders the get out the way before the weekend.  With Economic reports, this morning expected to show a weakening of consumers in the 1^st quarter the bulls may find it challenging to push higher.  Of course, with 100 companies expected to report today, we should expect this week’s bumpy ride to continue.  Watch for clues of reversal and have a plan to respond.  Have a wonderful weekend!

Trade Wisely,

Doug

Potholes abound.

Without question, this has been an odd earnings season full of potholes making for a very rough ride.  It began with the big banks beating estimates on both the top and bottom line but found sellers for the effort.  Unfortunately, that seems to have become a trend of this season as strong earnings reports continue to bring out the bears.  After the bell yesterday, we received a large number of strong reports, and once again the futures are pointing to a bullish open.  The question is will the positive open once again attract sellers?  A challenging environment to be certain.

The DIA, SPY and the QQQ are farther from the last swing highs of 4/17 and 4/18 then they are from the April lows.  The bounce yesterday was a nice relief, but with we remain under the 50-day averages the bears have the advantage, and any weak rally is therefore suspect.  Be very careful because the road ahead could be full of deep potholes.

On the Calendar

The Thursday Economic Calendar kicks off at 8:30 AM Eastern with the Durable Goods report.  Consensus expects an increase of 1.7% in March with ex-transportation up 0.5% and core goods rising 0.6%.  International Trade in Goods also out at 8:30 AM expects the deficit to narrow in March to $74.0 billion.  The one last 8:30 AM report today is the weekly Jobless Claims which consensus expects to come in at 230K as strong labor demand remains solid.  There are several other reports today as well at three bond events, but they are not expected to be market-moving.

A very busy day on the Earnings Calendar with 387 companies stepping up to report quarterly results.  Reports by in large continue to come in strong, but the trend this season appears to attract more sellers than the buyers after strong results.  Stay on your toes.

Action Plan

After Tuesday’s strong selloff the indexes managed to find a little buyers support, but bulls seemed to lack conviction.  At the end of the day, downtrends are still intact, and the DIA, SPY and QQQ’s remain under significant resistance levels.  Stocks that report strong earnings gap up at the open only to find sellers driving the price back down.  An odd and very challenging earnings season to trade.

As always the best defense is to say focused on price action and remain flexible.  Dow Futures are pointing to a slight gap up open this morning on the back of strong earnings reports.  The question is will that once again bring ou the sellers?  Tough call.  Currently, the Dow is over 950 points away from the swing high on 4/17 and about 700 points from the April low.  Stuck in the middle of the range I think anything is possible and traders have some very tough decisions to make.  Plan your risk carefully if you decide to trade and prepare for the possible intraday whipsaw that could reverse the market direction.

Trade Wisely,

Doug