Who invited the Bears to party?

Who invited the Bears to party?  They have been hiding in the woods for so long it’s been easy to forget about them.  Buy just about anything, and up it went with this incredible bull run.  Overall the index trends still up but yesterday was a reminder that the bears have not eaten in a very long time and they are hungry!  Now that earnings season is coming to an end I think we can expect more volatility and 2-sided price action ahead.

The market will likely begin to shift its attention to retail and the impacts of holiday spending.  It will also begin to ponder the likely December interest rate increase.   Next weeks Economic Calendar is full of big reports that could move the market around and increase volatility.  Stay focused this historic year may still have several more surprises up its sleeve.

On the Calendar

We finish up this light Economic Calendar week with just one report of interest.  At 10:00 AM Eastern Consumer Confidence is expected to remain near 13-year highs with a 100.0 reading vs. 101.1 in October.  After that is the Baker-Hughes Rig Count at 1:00 but there is really no chance it will move the market at all.

As earnings season begins to wind down, we only have 73 companies on the on the Calendar today.  Keep in mind that Monday and Tuesday still have a considerable number of reports.  The habit of checking for earnings reports should become part of your daily preparation.  They say it only takes about 30 days to develop a good habit that you will keep for a lifetime.  Keep up the good work.

Action Plan

After an ugly bearish morning, the Bulls started to regain control.  The bulls maintained control in the aftermarket Futures throughout the evening.  About midnight, however, the bears began to push back and seem to still be in control this morning.  Futures are currently pointing to a gap down of about 50 points in the Dow at the open.  Volatility spiked yesterday, and the intraday price action experienced several nasty whipsaws.

Now that bulk of earnings reports are behind us I think there is very good chance we will see higher volatility.  The overall trend of the market is still up, but I don’t be surprised if price action soon becomes much more 2-sided with bears coming out to play.  Historically Nov. and Dec are bullish months for the market due to the holiday spending that occurs.  However, there is nothing about this year that has followed traditional norms.  Focus on Price Action, support, resistance, and trend.  Price will always provide the clues forward if we can remove our bias and focus on what it’s saying.

Trade Wisely,

Doug

It almost seems unfair!

The Bull run has lasted so long and has been so strong it’s almost shocking when we see that the Bears still have teeth.  It almost seems unfair to be looking so good at the close yesterday to have it fully reversed at the open today.  As an inexperienced trader, an overnight reversal is like being betrayed by a close friend, and I would take it personally.  Yesterday I suggested the market was showing some elevation stress.  As a result, I made no new trades even though there were tempting buys all around me.  Believe me; I had no idea such a big reversal move would happen overnight.  Neither I or anyone else can predict the markets next move.  However, there were clues to market stress that I mentioned yesterday.

On the Calendar

The only market-moving report on the Economic Calendar today is the weekly Jobless Claims at 8:30 AM Eastern.  With Puerto Rico hurricane still a bit of a wild card the forecasters expect a 232K print today.  After that, we get several lesser important reports as well as bound auctions and announcements.

Although Monday and Tuesday of next week have a significant number of earnings reports today is the last really big earnings day this year.  Around 500 companies are expected to deliver results today so prepare for just about anything.

Action Plan

During the night Futures took a turn for the worse, and it was looking like we could have a sizable gap down this morning.  There was a sharp recovery about 11:30 central time, but as of right now the Bears pushed back and are testing the overnight lows.  If the market were to open at this very moment, the Dow could gap down about 60 points.  As a result of the huge number of earnings report before the bell, anything is possible.

Yesterday I wrote that price action was suggesting a little stress from the current elevation.  Although the Bulls made an impressive stand yesterday afternoon, my overall assessment has not changed.  I suggest lifting your caution levels when considering new positions.  Watch for a spike in volatility be careful to avoid chasing because bullish or bearish whipsaws are possible around market highs.  With the weekend nearing after such a long and strong bullish move I will be looking to take profits more than adding new trades.  It’s been a long time since we have seen a big bearish housecleaning move.  I have no idea when it might happen, but I won’t be surprised if we see one relatively soon.

Trade Wisely,

Doug

Price Action Clues

The bullish trend is still intact but yesterday’s price action began to show just a hint of stress at this elevation.  I don’t think there is any reason for panic, but I think it would be wise to reign in trading activity just a little.  The bulk of earnings season will be over this week and yesterday made me wonder if the bullish energy with fade as well.  Please keep in mind there is nothing on the daily charts pointing to a pullback or correction as of now.  The truth is it may be nothing more than a rest before going higher, but at this elevation, I want to err on the side a caution.

What this means is I will be a little quicker to take profits, a little more cautious when adding new risk, and very focused on price action.  If the Bulls step back in, I’m more than willing to ride the wave with them, but if we slip into a choppy consolidation or pullback, I want to curtail my trading activity.  As the weekend approaches I will also be thinking of taking some profits and reducing my overall exposure.

On the Calendar

There is only one noteworthy report on the Economic Calendar today.  At 10:00 AM we get the latest reading from the EIA Petroleum Status report.  They do no forecasting on this number, but current oil price moves suggest that traders are expecting the surplus to diminish.

The Earnings Calendar makes up for the light economic day with more than 450 companies fessing up their results today.  So far earnings have produced a lot of bullish energy this quarter.  The question I have is will the bulls be able to maintain that energy when the bulk of earnings reports finish this week?

Action Plan

The market indexes continue to trend higher but appear to be showing signs of stress at this elevation.  I’m in no way suggesting the bull run is over, but I do think its time to elevate our caution level.  It may be wise to consider taking some profits, adjusting stops and slowing our buying activity.  It could turn out to be nothing more than a market rest before the bulls powering higher.  Stay focused on price action for clues.  Futures are currently pointing to a slightly lower open but with so many earnings reports that could easily change so stay on toes and prepare for anything.

Trade Wisely,

Doug

No Fear

The only thing fear this that there is no fear!  On Friday last week, the VIX hit the lowest low ever recorded by the index.  As a result, complacency is very high as money continues to rush into the market as is it can never fall again.  Trust me it will.  However, you can also trust that you and will not be able to predict the time or the event that will bring back the bears.  So the moral of the story is, don’t fight the trend AND avoid complacency.

That sounds easy, but in reality, it’s pretty difficult to do because we have to set aside our bias and shut off the noise.  What works for me is to focus on the price action.  If we give up the idea that we can predict the next move of the market and look at a chart with an unbiased eye price will almost always provide clues.  What we want, hope or believe should happen is irrelevant.  Focus on Price.

On the Calendar

On the Economic Calendar this Tuesday we get started at 10:00 AM Eastern with the JOLTS report.  With the country running at near full employment the job openings number continues to grow.  Consensus for September is expecting job openings of 6.082 million.  Janet Yellen speaks at 3:00 PM but other than that there are some bound auctions and a non-market-moving Consumer Credit report to close the day.

While the Economic Calendar is light, the Earnings Calendar is very busy with more than 425 earnings reports expected.  Earnings continue to roll out with very strong reports, but that is no excuse to be complacent.  Make sure to check current holdings as well as those you are thinking so adding to your portfolio for coming reports.  A tiny effort on our part can save us from a very bad day if a company reports poorly.

Action Plan

The SPY, DIA and the QQQ’s once again all closed at record highs.  Overnight futures were very bullish with the Dow Futures up more than 50 points.  This morning that bullishness has tempered slightly with futures mixed.  However, with so many earnings reports before the market opens anything is possible.

I will continue to manage the positions that I’m in as well as look for new long positions.  The trend is up so until that trend ends I intend to trade in that direction.  Like everyone else, I believe the market is overextended but will not try to predict a top and find myself fighting the entire market.  What I do want to fight is complacency by staying focused on price action and have a plan to avoid emotion in the heat of battle.  Believe in preparation, not luck!

Trade Wisely,

Doug

Back in the Saddle

Good morning friends.  It’s good to be back in the saddle.  Las Vegas is always fun and meeting with fellow traders at the Expo is a blast.  However, as Dorthy says in Wizard to Oz, “There is no place like home.”

The Bulls remain in control, and the overall trends are still very bullish.  I will continue trading long, and with the overall trend, however, I think it would be wise to stay laser-focused on price action.  As strong as this bull run is we don’t want to become complacent.  One method to combat complacency is taking profits consistently into market strength.  Doing so will relieve the pressure on a winning trade.  There is nothing like taking profits to the bank to remove the emotions of fear and greed.

On the Calendar

There are several items on the Economic Calendar such as bond auctions but nothing that is expected to move the market.  At 12:10 PM there is a Fed Speaker to be aware of but again unlikely to move the market.

On the Earnings Calendar, there are just over 200 companies expected to report today.  As the last really big week for this earnings season we and expect about 1500 reports so stay on your toes for another wild week.

Action Plan

With the DIA, SPY, and QQQ all setting new closing records on Friday the trend higher is still absolutely intact and bullish at this time.  The poor IWM just can’t seem to get with the program join in with the rally.  As of now it continues to consolidate and would have to be considered the weakest of the indexes even though sellers have been unable to take control.

Futures this morning are mixed as I write this, but of course, with so many pre-market earnings reports anything is possible.  The bullishness of this rally has been remarkable, and I know many traders think these prices are unsustainable.  While I agree this bullishness seems irrational, it would be unwise to anticipate a market correction.  If you take a look at the tech bubble of the late 90’s you can see that irrational market behavior can last several years.  Please understand I am not suggesting this rally will last for years, I’m simply pointing out it has happened before.  Stay with the trend until the trend ends.

Trade Wisely,

Doug

Do you have an edge?

Will we get the typical pre-FOMC choppy price action or will the 380 earnings reports break the mold?  Perhaps the bigger question is, Do you have an edge?  On the positive side, the market is trending higher, and so far earnings have been overall strong.  On the other side, the market appears overextended, and the uncertainty of earnings reports and FOMC looms.

During times like this, I normally slow my trading activity.  I try to focus on my current portfolio first.  I tend to slow to add trades during times of uncertainty.  I’m only interested in low-risk entries to keep potential losses as small as possible.  I try not to chase the morning pops and drops.  I choose instead to wait 15 to 30 minutes before looking for new risk.  Always remember quality is more important than quantity and prepare for anything.

On the Calendar

On the Economic Calendar, this last day of October begins the FOMC 2-day meeting kicks off.  Their announcement regarding interest rates will occur tomorrow at 2:00 PM Eastern.   At 8:30 AM today we have the Employment Cost Index is expected to surge 0.7% today.  The 9:00 AM reading of the S&P CoreLogic Case-Shiller which is expected to rise 0.6% bringing the year-on-year rate up to 6.0%.  Then at 9:45 AM the Chicago PMI is expected to slow just slightly to 62.0 according to forecasters, which is still very strong.  The 10:00 AM Consumer Confidence is seen rising to 121.0 vs. September’s 119.8 print.

The Earnings Calendar ramps up today with more than 260 reports.  We had better get used to it because the number grows to more than 380 on Wed. and over 600 on Thursday.  Prepare, prepare, prepare.

Action Plan

Political turmoil, earnings, and FOMC.  Oh, My!  With so much on the proverbal market plate, the next few days the uncertainty alone is likely to give traders indigestion.  There are a lot of good charts, but because of all the news and the potential violent reactions can you still find an Edge?  Tough call.

The good news is that the market is still wildly bullish even considering yesterdays little pullback.  If earnings continue to come out positive, then there is every reason to believe that the market will continue its trend.  Futures are pointing to a bullish open, however, keep in mind that normally we get choppy price action as the market waits on the FOMC.  The problem is, I’m not sure normal applies here!  Anything is possible so plan accordingly.

Trade Wisely,

Doug

Remain Objective

With such a strong bull run underway it can be difficult to remain objective.  There are those with a wildly bullish market bias and those expecting an imminent collapse as a result of the being overbought.  The financial news only serves to fan the flames of both sides of this drama.  Toss in turbulent government and about 1500 earnings reports and you have the makings for a very wild week.  So whats a trader to do?

What works for me is to turn off all the noise, focus on price action, my trading rules, goals and discipline.  Price is King.  I can only make money if I’m on the right side a price move.  What I think or feel should happen is completely irrelevant and only clouds my view of actual price action.  Turn off the noise, set your bias aside and trade the chart.

On the Calendar

The Economic Calendar begins with a potential market-moving report at 8:30 AM Eastern.  The Personal Income and Outlays core number is expected to rise by only 0.1% September with the year over year rate stuck at 1.3%.  However, personal income is expecting an increase of 0.4%, and consumer spending is expected to jump 0.9% as a result of post-hurricane auto replacements.  At 10:30 AM is the Dalla Fed Mfg. Survey is not expected to move the market with a strong number of 21.3 according to forecasters.

The Earnings Calendar will be front and center this week with more than 1500 companies reporting.  Today we get it kicked off with just over 180 posting results.  I highly recommend taking the time to make sure of the reporting dates of companies you hold or those you are considering as new purchases.

Action Plan

Last week ended with a bang due to some great big tech earnings reports.  Both the SPY and the QQQ closed at new record highs while DIA and IWM lagged slightly behind.  Currently, futures are pointing to lower open as I write this but with so many earnings reports coming out that could easily change.  There is widespread speculation today of possible arrests from the Russian investigations.  That, of course, could temper the bulls enthusiasm as it could slow or even stop the tax plan.

As for me, I will stay the course, trading with the trend which is bullish but extended.  With such a huge number of companies reporting this week anything is possible.  Don’t be surprised to volatile moves up or down as the market reacts to earnings as well as the news.  Fast intraday whips are not out of the question so avoid chasing and wait for low-risk defensible positions.  My suggestion is to turn off the news, avoid the drama and stay focused on the price the action.

Trade wisely,

Doug

Maintain an Edge.

My knowledge of technical analysis and reading price action is what gives me an edge in the market.  To make a living as a full-time trader, I have to recognize when I have an edge and when I don’t if I want to make consistent profits.  We all know that individual earnings are unpredictable.  When we get them in groups of 500, they can easily swing the entire market before the open or after it closes.  That means to trade today I have to be willing to give up my edge, toss caution to the wind and embrace gambling.  I choose to maintain an edge!

I’m very light in my accounts and don’t expect to add new risk today.  With so many unpredictable earnings reports I have to forfeit my technical analysis edge to trade today.  Gambling has never been a winning strategy for me.  When my edge is gone, I prefer to stand on the sideline watching the battle and protecting my capital.  Buckle up friends; it could be a bumpy ride!

On the Calendar

One hour before the market opens the Economic Calendar get the day going with International Trade and the weekly Jobless Claims reports.  International trade is expected to widen the deficit in September with a consensus reading of $63.9 vs. $63.3 billion.  Also at 8:30 AM Eastern the weekly Jobless claims were expecting 235K only slightly higher than the 222K last week.  At 10:00 AM Pending Home Sales number is expected to rise 0.4% after last months 2.6% drop due to hurricane impacts.  There is a Fed Speaker at 10:30 AM as well as a few lessor reports and bond auctions.

Today is a huge day on the Earnings Calendar with more than 500 companies expected to fess up to last quarters results.  There are a lot of potential market-moving reports today with the likes of GOOG, MSFT, INTC, WDC, WYNN, AAL, BMY, COP, MO just to name a few.

Action Plan

Yesterdays light sell-off is being met this morning with futures are currently pointing to a slight bounce back at the open.  With so many companies reporting the bulls and bears will have a lot to fight about in the next 2 hours before the market opens.  Anything is possible.  Then after the market close will some really big hitters report, so no matter what happens during the day, it could all change in the after-hours session.

Trade Wisley,

Doug

A case for caution.

Earnings season creates lots of drama, intrigue, and hype as well as the dream of striking it rich by picking the big winner.  It’s easy for even experienced traders to get caught up in the gold rush that earnings season creates.  It’s the same business plan that built Las Vegas.  Trading an earnings event is gambling pure and simple.  Anything is possible, and I think a good reason to build a case for caution.

Successful trading is not a sprint; it’s a marathon that requires careful planning and endurance.  We all want more but the allure of the big win is often the temptress leading us to slaughter.  With more than 800 companies reporting the next two days anything is possible and could make for violent market action.  I have learned over the years (often the hard way) I don’t have to trade every day to be successful.  As technical traders, we give up our edge by over trading earnings.  Think about it.  If anything is possible, isn’t that gambling?  How can technical analysis give us much of an edge if anything is possible?

On the Calendar

The hump day Economic Calendar has three potential market-moving reports.  At 8:30 AM Eastern is the Durable Goods Orders which consensus expects a gain1.0% overall.  Ex-transportation is seen as up 0.5% and core capital goods also increasing 0.5%.  At 10:00 AM we get the New Home Sales report which is expected to moderate to a 555k annualized rate in September vs. the 560K in August.  Then at 10:30 AM is the EIA Petroleum Status Report.  There are no forecasts for petroleum, but a quick look at oil stocks would suggest traders are bullish and expecting demand to continue to lower national supplies.

The earnings calendar has more than 300 companies reporting today.  If you need an example as to why you need to be aware of earnings reports take a look at CMG, JNPR, and AMD this morning.  These companies reported after the close yesterday.  Those traders will be singing the blues with big losses in their accounts today!

Action Plan

Although the DIA set new records yesterday on the back of great earnings reports from MMM and CAT, the other indexes took a little siesta from the rally.  Futures are pointing to a flat open currently but with so many companies reporting earnings today that could obviously change in very quickly.

The overall trends are bullish, but for most traders, I think it’s time to exercise a little caution.  With so much data coming out the next couple days could be very challenging.  Big gaps and whipsaw price action can damage the accounts of even the most experienced traders.  Try not to get caught up in the drama and hype surrounding earnings.  Remember we want Quality over Quantity and not every day has to be traded to be successful.

Trade Wisely,

Doug

Anything is possible.

With the market having risen so much so fast it’s easy to assume that the market is overbought and thus must go down.  As a result, traders will try to predict the roll over failing to consider the extreme bullishness of this rally and the huge number of earnings reports this week.  The fact is, Anything is Possible!  Good earnings reports could easily extend this bull run higher.  If they disappoint some violent moves lower are possible.

Yesterday the indexes left behind bearish patterns suggesting lower prices to come but the futures are pointing to a gap up open?  I expect this will likely be a very challenging market for next several days with lots of premarket gaps and intraday whipsaws possible.  Try to avoid predicting and attempting to apply your personal market bias and just follow price when it provides good entry signals. Also, keep in mind that successful trading does not require you to trade every day. Cash is a position that is often forgotten and underutilized.

On the Calendar

The Tuesday Economic Calendar kicks off at 9:45 AM Eastern with the PMI Composite Flash.  The October Composite Index expected to remain unchanged with a comfortably strong reading of 54.8.  Forecasters are expecting the manufacturing PMI to come up to 53.3 vs. 53.1.  The services PMI has been the leader with a 55.3 reading in September which is expected to pull back slightly to 55.2 for October.  FYI, PMI stands for Purchasing Managers’ Index.

There will lots of earnings news affecting the market today will about 190 companies reporting.  Just a few to take note of; MCD, CAT, LMT, GM, JBLU, BIIB, MMM, GLW, SHW, AMTD, LLY, PHM plus much more.  Make sure you are checking reporting date of companies you hold and those you are interested in buying.  Preparation is very important.

Action Plan

For the first time in several weeks, we saw a little profit taking in the market as the day wore on yesterday.  The DIA left behind a Dark Cloud Cover pattern while the SPY dropped in a full-on Bearish Engulfing Pattern.    The QQQ also printed a Bearish Engulfing, but it actually finished the day looking more like an Evening Star Pattern.  The IWM remained in its tight range consolidation but also printed an Evening Star type pattern.  With all these bearish patterns does not mean the market has to go down?  Nope!  Let’s keep in mind the sheer momentum of this rally and the fact that huge numbers of earnings reports are rolling out.  Anything and I mean ANYTHING, is possible!

Futures have been climbing all night and as of now suggest about a 50 point gap up in the Dow.  Possibly another short squeeze like last Thursday?  Your guess is as good as mine.  I will first manage current positions and but will plan to wait until after the morning rush before looking for new trades.

Trade Wisely,

Doug