Focus on price action.

The last couple days of trading the bears have reminded us that they are still lurking about looking for weaknesses.  Even though their testing has not yet yielded much in the way of results, it’s been a good reminder to focus on price action for clues of their attacks.  It’s noteworthy that as the market continues to march higher, the VIX has slowly crept up as well.  As of now the bulls are in control, but there is a good reason to have a heightened awareness if the bears continue to test the battle-line.  Friday’s have lately been very strong, and I suspect the bulls will fight hard to do the same today.  As this bull run gets very long in the tooth don’t forget to take some profits to the bank.

On the Calendar

We have three important reports on the Economic Calendar this Friday all coming in at 8:30 AM Eastern.  The Durable Goods consensus expects a 0.6% gain with ex-transportation also seen up a solid 0.6%.  The Core Durable Goods orders are expected to come in at 0.5% which is also very strong.  Next, we have the first GDP estimate for the fourth quarter that is expected to decline just slightly to 2.9%  Consumer spending is expected to have a strong showing rising to 3.6%.  Then comes the International Trade in Goods deficit is seen narrowing slightly to 69.0 billion vs. the 70.0 billion in November.  After that, we have three additional reports that are not expected to move the market.

We get a little Friday break on the Earnings Calendar only showing 44 companies reporting results today.  Next week will be a very busy week with over 500 companies scheduled to fess-up on earnings.

Action Plan

Yesterday it was the DIA doing all the heavy lifting setting a new record high as a result of the great earnings out of CAT and MMM.  The SPY, QQQ, and IWM all decided to take a little rest yesterday that at one point threatened to slip south.  However, the bulls stepped in just before it became critical buying lifing them back into a safe zone.  Overall uptrends continue to hold, and the bulls remain in control.

The new normal seems to be that every day the bulls pump up the Futures markets and today is no different.  Currently, the Dow Futures are pointing to more than a 50 point gap up that could print above 26,500.  Both the QQQ’s and the SPY are also indicating the possibility of new record high prints at the open. What an amazing bull run!  Stay with the trend because it has without question been our best friend since the beginning of the year.  Remember Friday is a very good day to bank some profits ahead of the weekend.

Trade Wisely,

Doug

Filling the gap.

The market has gone up so long, and so strongly it’s shocking when we see a quick reversal filling the gap.  It was likely a painful wake-up call for some traders, which complacently chased the morning gap.  As bad as it may have seemed the market up-trend did not break.  The bulls are still in control, but we must always remember that the bears can attack at any time.  We must always be focused and prepared.  As earnings continue to roll out increased volatility is possible.

On the Calendar

The Thursday Economic Calendar gets going at 8:30 AM with the weekly Jobless Claims.  Consensus has the number coming in around 240K and continuing to be considered full employment.  At 10:00 AM is New Home Sales is forecast to come in with a  very solid 680,000 annualized rate.  Other than that we have several lessor reports that are very unlikely to move the market as well as several bond related actions.

The Earnings Calendar hits its high point for the week with over 160 companies stepping up to report.  Make sure you are checking reporting dates and have a plan that protects your capital.

Action Plan

New record high prints across all 4-major indexes with the futures gapped the markets higher at the open.  Chasing the gap bulls seem to rush in pushing the Dow up nearly 170 points in the early session.  But then the market seemed to run out of gas selling off and filling the gap which is something we have not seen for a long time.   The last two months alone have left many unfilled gaps behind due to the strength of this bull run.  It serves as good reminder that the market can quickly change character.  Traders have to always be on their toes and ready to quickly adapt to the changing condition.  A focus on price action is the first best place to see conditions shift.  Price is always the best leading indicator.

After filling the morning gap, the buy the dip traders rushed back keeping the uptrend intact.  Futures are once again pushing for a gap up open.  The bull will not give up this fight easily especially with the expectation of very good earnings reports.  However, yesterdays price action is a clue that increased volatility, and quick reversals are possible during earnings.  If you’re in the market, always stay focused and never let your guard down.  Complacency is an account killer!

Trade Wisely,

Doug

Overbought?

I seem to hear the term overbought a lot these days.  Personally, I believe it’s an overused word that is misleading and dangerous.  When I was coming up as a trader, I would hear that term, and it would damage my ability to evaluate a chart objectively.  It would bias my view of a stock or the overall market creating a couple of nasty problems.  1. I would be fearful of a fall not entering good trade setups and then have to watch from the sidelines as they rallied.  Or  2.  I would convince myself I needed to get short and fight the market.  Both cost me a lot of money!

The solution?  Ignore all the noise and form your own opinion with a focus on price action.  Talking heads, analysts or stock gurus don’t care about your money.  They rarely are called on the carpet for being wrong and even if they are the damage to your account is already done.  You’re the boss.  Make decisions based on what you see not what others might think.  After all, no one cares about your money more than you do!

On the Calendar

There are three important and potentially market-moving reports on the Economic Calendar today.  The first is the PMI Composite Flash at 9:45 AM Eastern.  Forecasters expect another strong showing of 54.4 composite, 54.0 services, and 55.0 manufacturing.  At 10:00 AM is the Existing Home Sales numbers is expecting a very solid 5.750 million annualized rate for December.  The strong sales have driven down housing supplies to only 3.4 months of standing inventory.  Then at 10:30 is the EIA Petroleum Status report which has shown a steady downtrend in supplies with the winter demand increases.  There is no forward forecast of oil supply numbers.  However, looking at strong gains in oil stock prices, investors seem confident that supplies will continue to decline.

The Earnings Calendar ramps up today with just over 100 companies expected to report today.  To protect your capital, it’s imperative that all traders have a plan for earnings on anything they own or are thinking of buying.  Failure to do so can result in painful lessons.  Make it a habit of your daily preparation!

Action Plan

Another day of new record highs closes in the SPY, QQQ, and IWM.  The DIA saw choppy 2-sided price action eventually closing down a whopping 11-cents.  There seems to nothing that can stop this raging bull run.  This morning the Futures are pointing to a bullish open and currently showing a possible gap up of nearly Dow 60 points at the open.  Of course, that could change substantially with all the earnings reports before the open.

Although the market seems very extended, there are currently no clues in price action suggesting that is about to change.  Stay with the trend but don’t chase.  Only enter stocks with good risk/reward ratios at or near price support levels.  Also, keep in mind as earnings reports ramp up intraday volatility can also quickly rise.  Whipsaws and swift reveals are common.

Trade Wisely,

Doug

History-making bull run.

New records across the board as the market reacts to the government closure coming to an end.  The bulls are running so hard it makes you wonder if their hearts could suddenly and without warning explode.  One thing for certain, I’m grateful that I can participate in this history-making bull run.  The futures have traded all over the place this morning.  I can only guess its due to the tsunami warning for the west coast after a big earthquake in Alaska.  The price action has been very fast so be careful at the open and for goodness sake don’t chase.  There will be a day when the tide will go rushing out, and profit-taking will begin.  Avoid complacency and have a plan to protect profits and capital if/when it occurs.

On the Calendar

Tuesday is another very light day on the Economic Calendar.  The is a Richmond Fed Manufacturing report at 10:00 AM which is very unlikely to move the market.  A couple bound auctions and a Fed Speaker after the market close at 6:30 PM.

On the Earnings Calendar, there are 67 companies expected to report earnings.  Please make sure you are checking reporting dates of companies you own or those you are thinking of buying.  Today we have a showing of some big blue-chip stocks like KMB, VZ, JNJ, and PG.  Reporting after the bell is TXN, CREE, and UAL.

Action Plan

Due to a family emergency, I had to quickly lever yesterday missing out on the surge higher.  Record highs in all four major indexes occurred as buyers rushed in after the news that the government shutdown was over.  If you thought the market looked overextended before the yesterday stretched that rubberband even tighter.  NFLX reported blow out earnings after the bell and futures were very bullish all night.  However, starting at 6:00 AM Eastern the futures suddenly started moving south and at this moment are continuing to do so.  The price action is very fast, so anything is possible by the open.

Without question the bulls are in control and the market trends are higher.  However, the market also appears to very extended which could trigger some profit-taking at any moment so I think it would be wise to exercise a little caution.  The current erratic price action in the Dow Futures should be a reminder just how quickly a shift could occur so stay on your toes.  Having said that earnings could continue to propel the market higher so avoid prediction and trade the price action making sure not to chase stocks that are already well within their run.

Trade Wisely,

Doug

Cautiously Optimistic

This weekend a friend asked me for my overall opinion of the market.  My answer was Cautiously Optimistic.  If you look at the economic markers such as jobs, interest rates, business growth, and wage growth, it’s pretty darn hard to be anything other than optimistic.  A quick look at the index charts and all you can see is bullish trends.  So why the caution?  The short answer is the appearance of extreme complacency.  Almost nothing seems to shake this market.  Look at the same index charts with a critical eye and its hard not see a bit of complacency.  The question on my mind is can earnings support these price levels or has complacency pushed us to high in anticipation?  As a result, I’m Cautiously Optimistic as we move into the bulk of earnings reports.

On the Calendar

A slow start to the Economic Calendar this week, with no market-moving reports and just a few bond auctions.  Perhaps that’s a good thing as the market deals with day-3 of the government shutdown and all drama whipped up by both sides of the aisle.

There are just over 40 companies reporting earnings today with HAL, PETS, & WYNN before the bell.  After the bell, Tech will be in focus as NFLX will dominate the earnings news.

Action Plan

Friday’s market saw a Dow index and the Dow Futures oddly decouple.  A good portion of the day the Dow index was trying go down while the Dow Futures relentlessly pushed higher.  Ultimately the Index closed positively, but the futures were sharply higher.  The SPY, QQQ and the IWM all closed at new record highs.  Price action overall seemed to rather slow and choppy as we heading into the weekend.

Futures this morning are pointing to a lower open as the market reacts to the government shutdown.  Currently, Dow Futures are pointing to a gap down of about 40 points.  I’m honestly surprised the reaction isn’t stronger considering the stretched overall condition of the market.  With no economic reports to react to the market may be a bit more sensitive to the congressional news as its spun one direction and then another.  Earnings reports really begin to ramp up this week.  Our first big tech report is after the bell today with NFLX steps up to report results.  Don’t be surprised to see higher volatility companies must prove these elevated levels can be justified.  There is a lot no the line!

Trade Wisely,

Doug

Shocking!

A day without new record new record highs?  Shocking!  It would seem the Bears are starting to test the strength of the advancing Bulls with little attacks here and there.  The results of this minor skirmishes have thus far proved the Bull is strong and unwilling to yield even a little.  Does that mean we should toss caution to the wind and chase into this rally?  Absolutely not.  Chasing with the fear of missing out cost me a lot of money over the years as I was learning my craft.  If you are going to buy look for stocks that are finding buyers at or near price support levels.  Futures are bullish this morning, and trends are still solidly pointing up so stay with the trend but choose your risk wisely.

On the Calendar

The Friday Economic Calendar is a light one for a change.  At 10:00 AM Eastern we get the latest reading on Consumer Sentiment which consensus it expecting an increase to 97.0 vs. Decembers 95.9.  Other than that Fed speaking tour continues with one at 8:45 AM, then 1:00 and 1:30 PM.

The Earnings Calendar is also light today with only 17 companies reporting earnings today.  Most notable are those reporting before the bell such as RF, CFg, FHN, KSU, and SLB.  Keep in mind that earnings reports ramp up heavily next week.  Make sure you are checking dates on positions you hold and those your thinking of buying.

Action Plan

Although there were a couple of intra-day bears attacks, the bulls managed to hold the battle line with relative ease.  During the evening there was an attempt to move the futures lower, but once again the bulls were not interested in giving up any ground.  Also during the evening, the US House passed a tempory spending bill.  Now it’s up to the Senate to prevent the government from shutting down at midnight tonight.  I don’t know about you, but this drama is getting old.

Despite the political drama and the intermittent bear attacks the futures market is putting on a confident face.  As I write this, the Dow futures are pointing to a gap up open, and the NASDAQ could set new records at the open.  Go Bulls!  Stay with the trend but keep in mind that gap up opens can be very whippy so avoid chasing.  As always I will be focused on profit taking more than adding new risk as we head into the weekend.  However, I will be looking for trades, and anything is possible.

Trade Wisely,

Doug

More buyers than sellers! 

Why?  More buyers than sellers!  Yesterday was nothing short of amazing as the bulls squeezed out any and all would be bears that dared to get short Wednesday.  Does the market appear very stretched? Yes.  Does that mean it must necessarily selloff?  Obviously not!  Everything seems to be coming up roses for the market.  Employment is very strong; businesses are growing, wages are increasing, manufacturing is on the rise, consumer confidence is near all-time highs, housing is strong and although rising rates are still historically low.  Now the question is can earnings growth justify current prices?  Early reports seem to suggest that the answer is, Yes.  Will it continue?  Only time will tell.

On the Calendar

The Thursday Economic Calendar has three important reports at 8:30 AM Eastern time.  First, we have Housing Starts which consensus is expecting a slight pullback to 1.280 million vs. 1.297 million annualized.  November permits are expected to come in at 1.300 million vs. 1.303.  Second, is Weekly Jobless Claims are expected at 250k a slight decline from last week.  The third is the Philly Fed Business Outlook continues to show enormous strength with backlogs building as new orders pour in faster than shipments can move out the door.  At 11:00 AM is the EIA Petroleum Status Report which has shown supplies trending lower with the cold winter demand increasing.  After that, we have a one Fed speaker at 6:05 PM, some non-market-moving reports and bunch of bond actions to round out the calendar day.

On the Earnings Calendar, we have more than 45 companies expected to report today.  Banking continues to be in focus such as KEY,  PACW, and MS before the bell.  JBHT is also notable before the bell today with IBM and AXP in focus after the close today.

Action Plan

Talk about a big daily price action whipsaw!  The Dow gained more than 300 points completely reversing the big selloff just the day before.  The Dow closed for the first time above 26,000 as early short traders were squeezed out by this raging bull.  The SPY and QQQ also posted new closing records while IWM lagged slightly behind but recovering significantly from Tuesday.  Although the market appears to very stretched, the simple fact is there are still more buyers than there are sellers.  Fear of a market correction seems non-existent as the bulls relentlessly charge higher.

As always I will stay with the trend, but I must admit to being very cautious about the wild enthusiasm the market is displaying.  Bullish complacency such as we see right now can quickly backfire so stay very focused on price action for clues.  With the futures pointing to a bullish open try not to get caught up an chasing stocks already well within a run.

Trade Wisely,

Doug

Gift of the Huge Gap

A market top or just a hesitation?  Clearly, traders opened the gift of the huge gap up open yesterday ringing the resister to protect profits.  Amid all the speculation that this was a market top lets remember that one day does not make a trend!  While it’s true, the market appears stretched and could benefit from a rest or pullback don’t expect the bulls to give up that easy.  There are several very big earnings reports today that could move the market, and I think most are expecting positive results.  Will it be enough to support this lofty market level is the question?  Higher volatility is likely as battle lines develop between the bulls and the bears.  Market sensitive is also likely as we move closer to a federal government closure unless Congress can get its act together.  The road ahead could have big potholes so make sure you have a well thought out plan.

On the Calendar

The Wednesday Economic Calender gets going at 9:15 AM with the latest reading on Industrial Production numbers.  Forecasters see industrial production rising 4.0 in December with total capacity utilization moving up to 2 tenths to 77.3%.   At 10:00 is the Housing Market Index which consensus is calling for a very slight for January to 73 vs. Decembers 74 reading.  Then at 2:00 PM, the Beige Book, comes out which is a report on economic conditions used at FOMC meetings.  We have three Fed Speakers today at 3:00 PM and 3:15 PM and finally 4:30 PM.  The report on Treasury International Capital which tracks the flow of financial instruments in an out of the U.S is released at 4:00 PM.

On the Earnings Calendar, we have 30 companies expected to report today, and several of them could be market moving.  Before the bell, we have GS, BAC, SCHW, FAST and USB.  After the bell, we will hear from, AA, FNLC, HBHC, and KMI.

Action Plan

Yesterday traders remembered the sell button location on their brokerage platforms taking advantage of the huge morning gap.  All four of the major indexes managed to set new record highs before selling began with the DIA breaking above 26K briefly.  As spooky as it might have seemed let’s keep in mind that a one-day pullback does not a trend make.  In fact, at the close of the day, all the major indexes are still above their rising trends.  What will be very important is if a follow-through day so selling occurs.  However, as I write this, the Dow futures are pointing to gap up of more than 120 points suggesting the bulls are prepared to fight.

Keep in mind; we have a bunch of big earnings report this morning that could move the market substantially before the market open.  Yesterday turned out to be one huge whipsaw, and I would not be at all surprised increased volatility continue for the next several trading days.  Price action around market highs can experience very fast reversals in either direction.  Also, remember the market could react sharply on the washing spin as we approach a federal government closure if a budget bill deal passes.

Trade Wisely,

Doug

Stampede of Bulls

The 2018 Stampede of Bulls rages onward and upward.  They have been running so long, and so hard you would think their hearts would soon explode.  Any bear that predicted they would soon stop has perished under their pounding hooves.  If you long the market stay long the market until price action clues suggest profit taking has begun.  If you’re on the sidelines then for goodness sake don’t let the fear of missing out convince you to chase this late in the rally.  As profits grow in such a strong bull run, so does the pressure on traders holding positions.  No one wants to sell to soon yet we all know a roll-over cold begin at any time.  My only advice, don’t allow greed get in the way of taking profits.  Consider scaling out to reduce the pressure and prevent emotional decision making.

On the Calendar

Only one important report on the Tuesday Economic Calendar.  At 8:30 AM the Empire State Mfg. Survey is expected to remain very strong at a consensus of 18.6 vs. Decembers 18.0 reading.   After that we have three bond auctions and believe it or not, no fed speakers.

On the Earnings Calendar, we have 23 companies stepping up to report quarterly results today.  Among them are UNH and CSX which both report before today’s bell.

Action Plan

Just when you think this market couldn’t get any more bullish, it does.  With 3-200 point days already this year, I believe this might be the strongest start to a year in my 28 years of trading.  Once again all four of the major averages closed at record high levels on Friday reacting to strong bank earnings.  Personally, I think the market seems excessively exuberant.  However, this morning futures are a perfect example of why it’s unwise to bet against such a strong trend.

As I write this, the Dow Futures are pointing to an opening gap of more than 200 points.  Who could have imagined that just 7-trading days after breaking through 25,000 the market could open above 26.000?  Remarkable bullishness indeed!  With such a massive gap up to new market highs chasing an entry would obviously be unwise.  Stay with the trend but also remain laser-focused on price action.  Logic would suggest profit taking could begin at any time but don’t try to predict when that might occur.

Trade Wisely,

Doug

Let the good times roll!

Yesterday I mentioned that I would not be surprised to see the rest and even slip into consolidation.  The Bulls obviously had other plans, setting new record highs in all the major indexes.  It seemed as if the entire world suddenly became worried that they were missing out and started buying with both hands.  Let the good times roll!

Yesterday’s rally was not only strong it was very widespread with strength even in microcap stocks.  As we head into the weekend, let’s not forget to take some profits and be thankful for the relative ease at which they occurred.

On the Calendar

The Friday Economic Calendar begins with two very important reports.  At 8:30 AM eastern is the Consumer Price Index which forecaster see rising 0.1%, less food and energy the and the number grows to 0.2%.  Year-on-year, the consensus gain is expected at 2.1% with the core at 1.7%.  Also at 8:30 is the very important Retail Sales that includes holiday spending.  December Retail sales expect an increase of a strong 0.5% with ex-auto sales at 0.4%.  10:00 AM brings the Business Inventories which forecasters see a 0.3% build for November inventories.  We have two Fed speakers today, one at 12:30 PM and another at 4:15 PM to close the calendar week.

On the Earnings Calendar, we have 18 companies reporting with the big banks in focus today.  Blackrock already reported very strong results and had increased their assets under management to a whopping six-trillion!  We will also hear from PNC, JPM, and WFC today.

Action Plan

The bulls were out in force yesterday closing all four of the major averages at new record highs.  Also, surprising was the strength across almost all sectors.  And it would appear that the bulls want even more with the Dow Futures currently pointing to a gap up of nearly 100 points.  Go, Bulls go!

As normal I will be much more focused on taking profits as we head into the weekend than adding additional risk.  We should also keep our emotions in check because all the rampant enthusiasm in the market it would be easy to chase an over-trade.  If you do add new trades today make sure you are entering low-risk positions that are at or near price support levels.  Don’t become complacent and stay focused on price action clues.  It may seem as is the market will never again selloff right now, but we all know the day is coming so stay focused.

Trade Wisely,

Doug