Waiting for the Fed

Waiting for the Fed

Waiting for the FedWaiting 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?

Are you still trying to predict?

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

Santa held Hostage?

Santa held Hostage?

Santa held HostageDuring the evening the Congress passed a continuing resolution that prevents a government shut down.  However, their action only extended the battle for 2-weeks.  Now the question is will the hoped-for Santa Claus Rally be held, hostage by Congress?  Santa held hostage, shame on you Congress!  My feeble attempt at humor is simply point out that the market will likely remain sensitive to the spin out of Washington D.C.  Of course, the bulls could find their inspiration in the Employment situation number to move higher, but the governmental pressure will be ever-present.  Also, weighing on the mind of the market is the upcoming FOMC meeting.  As for me, I will continue to focus on price action and continue to trade with the trend.  However, I may trade smaller than normal positions due to the uncertainty of the new cycle.

On the Calendar

We begin the Friday Economic Calendar with the very important Employment Situation report at 8:30 AM Eastern.  Consensus for November expects a strong showing between 184,000 and 190,000.  The overall rate is seen holding at 4.1% with hourly earnings increasing 0.3%.  At 10:00 AM we get a reading on Consumer Sentiment which is expected to tick higher to 98.8 vs. 98.5 last month.  Wholesale Trade numbers are also at 10:00 AM with the oil rig count at 1:00 PM.  Neither of which are likely to move the market.

On the Earnings Calendar, we only have 8-companies reporting.  Looking through the list, I would not expect any of today’s reports to affect the overall market.

Action Plan

Yesterday’s modest bounce held some key support levels and provided some much need relief.  There are a lot of charts showing bullish patterns.  Now, all we need is a little more volume to build some momentum, to continue the trend.  Currently, the Dow Futures are suggesting a positive option on the news from capitol hill.  During the evening Congress passed a continuing resolution that avoids a Saturday shutdown of the government.  Unfortunately, they only kick the can down the road two weeks.  That means the budget battle will continue and the market will remain sensitive to the news.  Perhaps the market will get a shot in the arm after the Employment Situation report to reinforce and inspire the bulls higher.

Trade Wisely,

Doug

Boredom

Boredom

BoredomDuring my years as a struggling trader, boring market periods in the market were very costly.  If I was sitting in front of my computer, I felt I should be trading.  I would run every scan I had ever thought of rushing to find something to trade never once considering the overall market condition.  Boredom is as dangerous to a trader as the emotions of fear and greed.  It would cause me to force trades or talk myself into positions I had no good reason to buy.  Learning to stand aside when I had no edge was a very hard lesson to learn, and it cost me more capital than I care to admit.  Always remember that you don’t have to trade every day to be successful.  In fact, trading less and only when you have an edge produces better returns and a higher win/loss ratio.

On the Calendar

Thursday’s Economic Calendar is a full one, but there is only report with any concern for moving the market.  At 8:30 AM is the Weekly Jobless Claims which is expected to remain near historic lows with even Puerto Rico numbers declining.  There is a Fed Speaker at 8:30 as well but after that several non-market-moving reports.

On the Earnings Calendar, we have about 45 companies reporting their results today.  Continue to build the habit of checking for reports on the stocks you currently own and those you plan to purchase.  Failure to do can turn out to be a painful experience.

Action Plan

Yesterday again experience a very light day of selling in the DIA and IWM while the SPY and QQQ found some buyers at support.  Overall the volume was light, and price action continues to be choppy.  Unless we have a news event shake us loose, I think we should expect more choppiness today.  Keep in mind the market could be waiting for the Employment Situation number on Friday or even the FOMC next week for inspiration.  Another potential market driver is the pending government shutdown at midnight Saturday if Congress fails to get it’s act together.

I am continuing to prepare for new trades if we see some buyers begin to step in at support levels.  However, I’m in no rush and will wait for buy signals to appear before adding risk.

Trade Wisley,

Doug

Where is Santa?

Where is Santa?

Where is SantaWith the last 3-days of selling, traders are starting to wonder, Where is Santa?  Gloom and doomers have been predicting the demise of the 2017 bull run all year.  Now having strung together the first 3-day selling streak since August they are out in force predicting the market top has happened.  Could they be right?  Of course, even a broken watch is right twice a day.  Before diving headlong into a pit of despair take a minute to examine the charts.  The DIA and the SPY are still trending up!  The QQQ’s are suggesting caution, and the IWM is holding a significant support.  Also, take notice that there has been no panic selling and the VIX is not registering fear.  Historically the so-called Santa Rally appears 7 to 10 days after the beginning of December.  Stay focused on price it will provide us the answers.

On the Calendar

The Economic Calendar for Wednesday gets going at 8:15 AM Eastern with the ADP Employment Report.  The ADP has had a rough year widely missing the actual number over and over.  However, ADP was spot on in October with it 235,000 number.  ADP is expecting a 186,000 print for November.  Productivity and Costs will report at 8:30 AM.  Forecasters see nonfarm productivity rising 3.2% with labor cost increasing 0.3%.  At 10:30 we will get the EIA Petroleum Status report which has recently seen supplies declining helping to support oil prices.

We have 50 companies stepping up report earnings results today.  A few of the notable reports before the bell are AEO, FRED, HRB & KLXI.  After the market closes hear from AVGO, LULU, TLRD & VRNT.

Action Plan

Even though the bulls made an effort to gap the market higher at the open yesterday, ultimately profit-taking ruled the day.  There was no panic just a steady stream of slow, deeply controlled selling.  Yesterday the SPY registered the first 3-day selling streak since August.  So does that mean the market top is in and the 2017 bull run has finally come to an end?  I wouldn’t bet on that just yet because the overall trend in the daily SPY and DIA charts still show an up-trend.  The QQQ’s and the IWM certainly suggest caution is warranted but at this time no clear signals of stockholders running for the doors.

The VIX barely moved yesterday and the slow, grinding selling yesterday offered no hints of panic.  If Congress can actually complete one project this year (tax reform) and prevent a government closure midnight Saturday, then Santa might return!  Set aside your bias and focus on the price action for clues.  Listen to the market and avoid trying to predict.

Trade Wisley,

Doug

Things that make you say Hmm? 

Things that make you say Hmm? 

Things that make you say Hmm?For those of us that watch price action yesterday left us with more questions than answers.  Clearly, bearish candle patterns were left behind, but the majority of the indexes are still in up-trends.  Things that make you say Hmmm?  As of now, only the QQQ is showing technical damage.  From the candle patterns, most traders would expect a big increase in fear, but the VIX seemed only to yawn in boredom.  There is an abundance of clues to suggest caution but also a sense that anything is still possible.  With weighty decisions still to be made in Congress this week expect the market to be very sensitive to the news cycle.  Plan your risk carefully and continue to watch for violent price moves in reaction to news events.

On the Calendar

We kick off Tuesday’s Economic Calendar with the International Trade Report at 8:30 AM.  Once again the international trade deficit is expected to widen in October.  Forecasters see a 47.4 reading vs. 43.5 in September.  At 9:45 there is PMI services which is not expected to move the market coming in unchanged at 54.7.  Then at 10:00 AM we get the ISM Non-Mfg. Index which posted its highest score of 60.1 in October.  Consensus expects this number to remain very strong only slowing to 59.0 in November.  A couple of bound auctions will round out the rest of calendar.

On the Earnings Calendar, there are 38 companies reporting quarterly results.  Notable are AZO, BMO, and TOL before the bell with PLAY and RH after the bell today.

Action Plan

After opening at new record highs in the DIA, SPY, and IWM profit takers took the gift of the gap and rang the register.  Selling off to fill the gap obviously left behind price action candles suggesting a least a tempory top.  The QQQ’s gave a half-hearted attempt to show bullishness with a gap up, but this index suffered significant technical damage.  Not only did it leave behind a bearish engulfing it also printed a lower high failure.

This morning the Dow Futures are pointing to a gap up while at the same time the Nasdaq Futures suggest a gap down to a new low.  Surprisingly with all the selling yesterday day the VIX didn’t register a groundswell of fear as one would have expected.  The overall trends in DIA, SPY, and IWM are still up despite the bearish price action signals.  So although there are a lot of clues suggesting caution only the QQQ has built a case for bearishness.  Personally, I will be taking a wait and see approach without bias as to direction.  I continue to expect market sensitivity to the D.C news cycle making violent price moves possible.

Trade Wisely,

Doug

Bulletproof?

Bulletproof?

BulletproofWith the futures pointing to a 200 point gap up in the Dow on the back of the Tax Reform bill passage, it would seem the market is bulletproof.  Even the threat of nuclear war seem to be nothing more than an annoying mosquito easily shooed away.  Now the Dow has 25,000 in its cross-hairs and seems to have all the money and energy necessary to drive for that goal.  However, I doubt the ascension to this plateau will be a smooth one.  Friday’s full reversal intraday whipsaw may be a clue to fast and whippy price action ahead.  Big price action swings could be possible as we move forward making it very challenging for swing traders.  The bulls are obviously in control, but Friday’s price actions should serve as a reminder that the bears are still here and they have been waiting to eat for a long time.  Plan your risk carefully.

On the Calendar

On the First Monday of December, the Economic Calendar has a light day.  At 10:00 AM we get the Factory Orders report which will likely show strength and confirm expectations for fourth-quarter manufacturing strength.  After that just a few bound auctions and a nonmarket moving TD Ameritrade report.

On the earnings calendar, we have 14 companies reporting today.  A quick scan of the list and I don’t see any that are particularly noteworthy unless of course, you happen to own one of them.  Make sure to keep checking and remember you’re the boss. Expect the best from yourself.

Action Plan

Last Friday I suggested that the market was going to be very sensitive to the news and to prepare yourself for possible violent price moves.  During the Flynn testimony, we go just that!  A very fast and nasty whipsaw that looked like it had completely reversed in just 20 minutes of trading.  The promise of the tax reform bill likely to pass in the Senate revered it once again as the bulls regained control.

Now that the bill has passed the bulls are running hard this morning.  The Dow Futures are pointing to a gap up around 200 points and sending the charts into a parabolic territory.  One would think a huge selloff should be just around the corner, but I sure would not want to be betting against the strength of this bull run.  In fact, with Dow 25,000 in sight, it’s likely to attract the bulls like a moth to a flame.  Continue to trade with the trend but plan carefully and avoid chasing.  Expect elevated volatility with triple-digit gaps and whipsaws possible in the days ahead.

Trade Wisely,

Doug

 

Political Drama

Political Drama

Political DramaYesterday the Tax Reform bill appeared to be a slam dunk and a vote to was expected to happen at any time.  I mentioned yesterday the next couple weeks could be bumpy as all the political drama unfolds.  Last nights delay has the Washington spin machine at high speed with both sides churning out more and more dramatic rhetoric.  Listen closely, and you can hear the dramatic music reaching a crescendo.  One side vows to save the day while the other promises to fight to the death because of horror this bill will bring.  Blah, Blah Blah!  Unfortunately, the stock market is directly in the line of fire.  Traders should be very cautious.  Violent price shifts are possible in either direction so plan your risk accordingly.

On the Calendar

Friday’s Economic Calendar has several important reports this morning, but before that happens, we will hear from two Fed Speakers.  Bullard speaks at 9:05 AM and Kaplin at 9:30.  The PMI Manufacturing Index is at 9:45 AM and forecasters expect a very strong 54.5 print today.  At 10:00 AM the IWM Mfg. Index has topped consensus several weeks in a row.   However, the forecasters today call for a slight pullback to 58.4 vs. 58.7 last month.  Construction Spending is also at 10:00 with the October’s consensus increase at 0.5% due to strength in single-family home building.  And then who would have guessed we will hear from yet another Fed speaker at 10:15 AM.

On the Earnings Calendar, we only have 18 companies reporting today none of which are particularly notable.

Action Plan

The promise of Tax Reform spurred the bulls into a full-on stampede yesterday as traders seemed to buy stocks with both hands.  The Dow smash through 24,000 finally coming to rest up a whopping 331 points on massive volume.  It’s also interesting to note that the VIX also rallied suggesting fear at this evaluation is growing.  OPEC’s decision to extend their production reduction program also played a part in pushing the market higher.  Oil companies surged higher on the news.

This morning futures are looking lower because the Tax Reform bill suddenly seems to have lost votes.  The Senate now says the vote could happen today, but they are scrambling to rewrite provisions of the bill on the fly.  I repeated over and over yesterday in the trading room a warning to not chase this rally.  Those that did could have a tough lesson learned today.  If by chance they fail to get this bill passed we could experience a very dark in the market.

Trade wisely,

Doug

Washington DC Spin

Washington DC Spin

Washington DC SpinThe US Senate is now the top focus of the market as the Tax Reform bill head to the floor for debate.  According to reports, a vote could come before the end of business Friday.  In my opinion, there is never a more dangerous time in the market then when Politicians, rhetoric and the Washington DC Spin machine is in control.  Anything is possible, and high volatility and big intra-day swings can occur.  Also, keep in mind that even after the Tax Reform dog and pony show is over we still face a Federal Government shutdown in early December.  Who knows what kind of political drama that could create.  I suggest if you do trade then trade small and stay on your toes because the price could be very bumpy the next couple weeks.

On the Calendar

The Thursday Economic Calendar begins at 8:30 AM Eastern with two important reports.  First, the consensus for the Jobless Claims number this week is 240K vs. 239K on the previous reading.  If not for the impacts of Puerto Rico Jobless Claims would be at or near historic lows.  Second, is the Personal Income and Outlays report.  Personal Income is see rising 0.3% while consumer spending could slow slightly to 0.3%.  The Core index expects a 0.2% increase for a yearly rate fo 1.4%.  Also at 8:30 AM we have a Fed Speaker and then another at 1:00 PM to pontificate on interest rates.  At 9:45 AM is the Chicago PMI which forecasters are calling for a decline to 63.5 vs. 65.2.

On the Earnings Calendar, we have 38 companies reporting.  Please continue to check current holdings as well as those you are considering for purchase for reporting dates.  Just a few seconds of effort can save you from significant losses if a company reports poorly.

Acton Plan

Yesterday’s price action left behind patterns of uncertainty in the DIA, SPY, and IWM.  The QQQ’s on the other hand, reminded us that the bears still exist and their teeth are very sharp!  Many trends in the Tech sector broke down yesterday, and there are reversal patterns galore.  As bad as it was, please remember it’s not the first move lower that matters.  A failure to make a new high after it bounces is where the real selling could begin.  The sky is not falling.

New out of Washington that the Senate voted mover the Tax Reform bill forward to floor debate has fired up the Futures this morning.  Currently, the Dow futures are suggesting a large gap up at the open.  Remember gaps to new market highs can create whipsaw price action producing fast intraday reversals.  Be careful not chase and get caught up in the morning drama.  A vote to pass the Tax bill could happen within the next 24 to 48 hours.  If it happened to fail; well, use your imagination.

Trade Wisely,

Doug

Tax Reform

Tax Reform

Tax ReformWith the Tax Reform bill looking as if it will pass, markets thumbed their nose at North Korea.  Who would have guessed that money trumps a threat of nuclear attack?  With all this going one would have expected the VIX the have gone wild.  Oddly enough the VIX barely moved the entire day!  Futures markets want the party to continue this morning with Dow pointing to a gap up around 70 points.  Anyone caught holding short positions yesterday got completely run over by stampeding bulls.  A very good reminder that shoring an up-trending market is an unwise business decision.  Stay with the trend but avoid the temptation to chase and consider taking profits into strength.

On the Calendar

The Economic Calendar starts off with the very important GDP report at 8:30 AM eastern.  The 2nd estimate for the 3rd-quarter GDP is expected to come in higher at 3.3 vs. the 3.0 on the first reading.  Oddly enough consumer spending is expected have nearly paused, up from 2.4% to only 2.5%.  The overall GDP Pirce index is expected to remain unchanged at 2.2%.  Janet Yellen speaks at 10:00 AM while the Pending Home Sales Index reports.  Consensus expects a sharp rise of 1.0% in October pending home sales.  At 10:30 AM is the EIA Petroleum Status report which they don’t estimate forward, but a recent pipeline problem may have decreased stockpiles.  There is another Fed speaker at 1:50 PM followed by the Beige Book at 2:00.

On the Earnings Calendar, I see 49 companies reporting results today.  TIF is one of the companies reports before the bell while LZB, HOME, JACK, and WDAY are among those reporting after the bell.

Action Plan

All four major indexes ignored the threat of a North Korean nuclear attack setting new record highs across the board.  Amazing and just a little spooky is the fact that the VIX barely moved yesterday in response to such a strong rally.  Very odd.  Even the IWM pitched in yesterday showing nice energy as it reacted higher from price support.  Logic would suggest after such a big move the market would take a rest, but currently, futures are pointing to a gap up of nearly 70 points!  The surge in bullishness seems to be the direct result of the Tax Reform bill looking as if it will pass.

Thank goodness we stuck to our rules and continued to trade with the trend because we were nicely rewarded yesterday.  Continue to trade long but please avoid chasing as this kind of wild bullishness can suddenly find profit takers.  Remember the rule, take profits into strength!

Trade Wisley,

Doug