Bulls continue to show strength.
Bulls continue to show strength.
After such an impressive run higher, the Bulls continue to show strength this morning. The Dow futures are pointing to a new record high, and the VIX hovers near historic lows. Is there really no fear in the market or are we looking at mass complacency? Your guess is as good as mine. It is logical to think a pullback could begin at any time after such a strong bullish move. However, it’s a mistake to try an predict a top.
As I was coming up as a trader, this is a mistake that I would repeat over and over. I would predict that the market was up so much it absolutely had to come back down. Sadly that proved to be a very costly mistake for me. At times I would stand aside anticipating a pullback only the watch the market continues moving higher and leaving behind. I would often miss out on the biggest bull run of the year. Even worse I would at times get short thinking the Bears had to take over soon only to be run over by the bulls.
When we look at the charts, it’s logical to think a pullback is likely and we should prepare. However, if we put our bias aside, we see a chart showing no evidence of a pullback as of now. I am not suggesting we should throw caution to the wind and buy with both hands if fact I have been taking profits into the strength. I am only trying to suggest that you see the chart as it is not as you believe it should be! Emotion can easily trump logic making a run last much longer than anyone expects.
On the Calendar
About all that’s on the Economic Calendar is that today is Columbus Day. As a result, banks and bond markets closed in observance of the national holiday.
On the Earnings Calendar, there are 14 companies reporting today, but I don’t see anything particularly noteworthy or market moving.
Action Plan
The DIA, SPY, IWM, and QQQ’s decided to a little rest on Friday morning, but the Bulls had another plan’s for the afternoon lifting them off the intraday lows. The QQQ’s managed a new record high close by the end of trading on Friday following through after it’s impressive breakout Thursday. As of now, the futures are suggesting a bullish open today with the Dow possibly opening today’s trading at yet another record high. Friday saw the VIX rise slightly after having reached a new closing low Thursday.
With the banks closed today it’s possible we could see a choppy light day after the morning rush. There are a lot of good-looking charts to choose from but make sure that you’re not chasing. I want to continue to trade long with this very bullish trend however we should not be surprised to see profit taking begin at any time. Plan accordingly.
Trade Wisely,
Doug
Can this Bull Run continue?
As this week trading week comes to a close, the majority of traders have just one question on their mind. Can this Bull Run continue? Common sense would tell us the odds of a pullback after seven straight days of new records is pretty high. However, the strength of the run ahead of earnings season already defies logic. I say that only to remind you that predicting what a market may or may not do is an exercise in futility. Anything is possible! The best we can do as traders is have a plan with a set of rules to manage our emotions. As a result of my rules made it necessary for me to lighten up my risk to the market by taking some profits. Logic says a pullback is likely, but the price action has no hint of a pullback as of now. If there are more buyer than sellers, then the market could still move higher! What matters is that you are managing you and remembering that this is a business.
On the Calendar
On the Economic Calendar today we have the Mr. Big report at 8:30 AM with the Employment Situation. As this report will incorporate the effect of the hurricanes, the consensus estimates are all over the place. Essentially the best they can do is guess. For example, the nonfarm payroll expects 100K, but the consensus ranges between Zero and 140K. There are two reports unlikely to move the market, Wholesale trade at 10:00 AM and Consumer Credit at 3:00 PM. There are 5 Fed Speakers on the calendar today.
On the Earnings Calendar, there are only eight companies reporting today. I do not see any earnings reports that are particularly notable.
Action Plan
After the news reported a successful vote in Congress allowing the Tax Plan Process to move forward, the Bulls came out in force to express their support. As I mentioned above, I reduced some of my risk to the market closing part or all of a few positions to capture gains ahead of the weekend. The VIX made a new closing low yesterday below a 9-handle. Truly amazing! I think it would be wise to guard yourself against complacency.
Once again I will be more focused on taking profits today, but I will not rule out the possibility of new trades.
Trade Wisely,
Doug
Unable to find profit takers.
Although the market appears to be quite extended, its unable to find profit takers just yet. The VIX continues to dance near historic lows but as of yet unable to make a run for a new low print. Perhaps the market is waiting on all the Fed speak today or more likely focused on the Employment Situation number that comes out Friday morning. None the less I will continue to be very focused on price action and prepared to take profits ahead of the weekend if weakness shows itself. With an extended market and the weekend near, I will need to uncover a nearly perfect trade setup for me to buy additional risk.
On the Calendar
The Economic Calendar events of interest begin at 8:30 AM Eastern. International Trade forecasters are calling for a narrowing of the trade gap this month due to the hurricane effect. August is expected to come in at $42.5 vs. July’s 43.7 reading. A narrowing trade gap should be of benefit to the 3rd quarter GDP. Also at 8:30 AM is the weekly joblesss claims and is expected to come in with a reading of 265K vs. 272k last week. There are 4 Fed Speakers on the calendar today with three of them speaking in rapid succession beginning at 9:15 AM. At 10:00 is Factory Orders which is expected to rise 1% in August vs. the 3.3% decline in July.
On the Earnings Calendar, there are only 14 companies set to report. Of note are reports STZ before the open and COST after the close today.
Action Plan
The incredible strength of the Bulls kept profit taking in check even though it’s quite extended. The promise of a tax plan continues to inspire investment no matter the price or valuation. Also, keep in mind that earnings season will begin soon and there seems to be tremendous optimism of strong reports.
With the market continuing to show enough strength to hold up I maintained all the current positions. As a result, I again will focus on price action and prepare to take some profits before the weekend if necessary. As we wait for the big employment number Friday, it would not be a surprise to see choppy light volume action again today.
Trade Wisely,
Doug
Bullish But Stretched
Bullish But Stretched
There is no doubt that the Bulls are firmly in control as this rally continues to set new records daily. Both the DIA and the SPY showing impressive strength while the rally in the IWM has been nothing short of incredible. I think even the most enthusiastic traders would have to admit at this point the market is Bullish but Stretched. Could we continue going higher? Yes, we absolutely could, but the likelihood of a profit-taking pullback is growing. It’s my opinion that trying to enter this run now is like a dog chasing a loaded truck and at high risk of being run over.
On the Calendar
Before the market open, we have the ADP Employment report on the Economic Calendar at 8:15 AM Eastern. The ADP has been missing the actual number for months, and I think has begun to lose credibility with traders. The August ADP was 237K while the actual came in at 165K. Obviously a huge swing and miss. The September ADP is looking for 140K.
At 9:45 AM we get a reading form PMI Services, but the more important number is the ISM Non-MFG Index at 10:00. The ISM forecasters are calling for the September number to come in at 55.5 vs. the August 55.3. At 10:30 AM is the very important EIA Petroleum Status Report. The current rally in oil stocks would suggest the market is expecting further declines in supplies. We have a Fed speaker at 3:00 PM and then the Fed Chair speaks at 3:15 today.
Action Plan
Currently, the futures are suggesting a flat to slightly lower open this morning which should not be a big surprise after such a strong run. I believe the market could begin to show some stress and as a result, profit-taking could begin at any moment. Please understand I am in no way shape or form suggesting bearishness because there is no evidence of that in the charts. The VIX moved slightly higher yesterday even as the overall market us rallying. That’s odd but could be a small clue to the stress I mentioned above.
My focus as always will be on the price action, and I will be much more inclined to take profits today rather than entering new positions. I love selling into strength! Like the song says, know when to hold em, know when to fold em, know when to walk away and know when to run. I think is time to consider putting some money in the bank and walk away from the table for just a little while.
Trade Wisely,
Doug
The Bulls continue their march higher.
After seeing the terrible news out of Las Vegas, I was half expecting to see the market lower this morning. Looking at the futures clearly, that is not the case as the Bulls continue their march higher. Lately, I have heard from a lot of traders trying to predict a market selloff. While their argument is rational and compelling, they are missing out on a very key element. Emotion! Let’s face it the market is emotional and thus does not have to abide by the rules of rationality. If the market was rational how could you explain the late 90’s bull run? As retail traders, it’s very important that we simply continue to trade the trend that is before us and avoid the urge to predict. Now that does not mean we throw caution to the wind and go all in! We must always be prepared and focused on price action. When the trend is over price will tell us, and we need to have a plan ready to go to avoid emotional decision-making.
On the Calendar
The Economic Calendar begins the 4th quarter with the PMI Mfg. Index at 9:45 AM Eastern time. Forecasters see no change from September’s 53.0 print. At 10:00 AM we get the most important number of the day in the ISM Mfg. Index report. The consensus for September’s headline is 58.0 vs. August’s 58.8. Also at 10:00 AM today is Construction Spending where the consensus call for August is a 0.3 percent rise. We have a Fed Speaker at 2:00 PM and few bond related items to round out the day.
On the Earnings Calendar, we have under 20 companies reporting, and I would not expect any of them to be market moving. With the 4th quarter earnings season just around the corner, I would be wise to make them part of your planning going forward.
Action Plan
The futures are pointing higher with the DIA, SPY, and IWM likely to make new record high prints at the open. The QQQ is lagging behind and still under price resistance but also gapping higher at the open. Always keep in mind that gaps at the market open can produce whipsaw price action so avoid chasing in at the open.
Because I don’t want to chase, I will be looking for new long trades setting up at or near price support levels.
Trade Wisely,
Doug
Bullish but slightly apprehensive.
Bullish but slightly apprehensive seems to be a good description of the overall market condition this morning. As the war of words continues to intensify between the US and North Korea, it’s like a nagging headache the market would like to ignore. However, we should prepare for sudden spikes of volatility and the possibility of violent price action if another missile launch occurs. There are a lot of great looking charts and bullish patterns, but I will only consider defensible low-risk positions right now. I also want to guard myself against becoming overly long with such looming uncertainty.
On the Calendar
The last week of September begins with a light day on the Economic Calendar. At 8:30 AM Eastern we have the Chicago Fed National Activity Index and then at 10:30 AM the Dallas Fed Mfg. Survey. Both are reports of lesser importance and are unlikely to move the market. We have three Fed Speakers today, one before the market open, one at mid-day and one what speaks after the close. A few bond auctions round out the economic calendar day.
The Earnings Calendar shows about 25 companies expected to report quarterly results today. Looking through the list, I don’t see any market movers, but RHT is one that I have seen mentioned in the several times in the trading room. If you’re holding RHT make sure you have a plan when it reports after the close today. We are only about three weeks away from the beginning of 4th quarter earnings. It would be wise to begin considering when companies report as you place new trades.
Action Plan
The uncertainty surrounding the weekend and North Korea only had a modest effect on the market last Friday. If fact IWM finally managed a breakout and a new closing record high. The DIA left behind and indecisive candle while the SPY managed to rally off of the morning lows. The QQQ at one point in the day slipped below the 50-day moving average, but the Bulls went to work bouncing off the average. Fear of a market sell-off seems out of the question with ViX very close to record lows or is this extreme complacency? You decide.
We took some nice profits on Friday to reduce risk to the market so as long as the market remains in it’s up-trend, I will be looking for new portfolio additions. The Dow futures are pointing to a slightly lower open today, so there is no need to rush. One chart of particular interest is AABA closing Friday with a great morning star pattern right off of support and trend. Keep an eye on it for any follow through higher as a potential entry.
Trade Wisely,
Doug
Saber rattling intensifies.
As the saber rattling intensifies between the world and North Korea, the US makes moves to cut off the countries money supply. So once again the market faces an uncertain weekend. Asian markets reacted lower, but currently, the US Futures markets are trying to shake off the threat. The Bulls have been incredibly strong, and yesterday the price action began showing a little stress. Combine an uncertain weekend, with the market at this elevation some profit taking would not be a surprise. I would also not be that surprised if the Bulls decide to thumb their nose at the threat an rally in defiance. Stay focused on price action and try not to predict. The clues will be there if stay focused on price and control our emotions.
On the Calendar
The last business day this week begins and ends with Fed Speakers on the Economic Calendar. At 9:45 we get the important PMI Composite. The September PMI consensus composite number expectation is 54.9, and the manufacturing number is coming in at 53.0. After that, it should be smooth sailing with only a couple of minor reports unlikely to move the market.
On the Earnings Calendar, we have less than 20 reports expected today.
Action Plan
As we head into the weekend the North Korean “Rocket Man” escalated his threating rhetoric. The news is now suggesting he may detonate a nuclear device over the water soon. Overnight the futures reacted sharply lower on the news. Currently, the futures are trying to shake off his latest threat pointing to only a slightly lower open.
Facing another weekend of uncertainty It would not be unreasonable to see some profit-taking. Yesterday the price action in the major indexes began to show just a little stress. The DIA is now displaying a Hanging Man pattern followed by a bearish engulfing candle. Even though it’s a bearish pattern, it only suggests a lower print is possible today. Stay focused on the price action because it will provide the clues if we allow it to do so. As you know, I favor taking some profits before the weekend and will not change today. Have a great weekend everyone!
Trade Wisely,
Doug
7th Straight DIA Record
After the FOMC volatility, the Bulls demonstrated tremendous strength setting the 7th straight DIA record. Equally amazing is that SPY and QQQ’s remain stuck in choppy consolidations while the DIA does all the work. As a result of yesterdays price action, there is a slight concern in the candle pattern that I describe in the Action Plan section of this post. The DIA is clearly leading the overall market, but we will soon need to see the SPY and QQQ’s start to participate. The IWM has made an impressive comeback, but it will be important to see how it deals with the resistance high. As you know, I love taking profits into strength. With the weekend nearing I will be thinking about banking some gains especially if the market begins to display any weakness over the next couple days.
On the Calendar
The Thursday Economic Calendar kicks off at 8:30 AM Eastern with the Weekly Jobless Claims. Due to the impacts of hurricane season, consensus expects claims to increase to 303k today. Also at 8:30 is the Philly Fed Bus. Outlook Survey which is expected to remain extremely strong with an 18.0 reading this month. After that, we have lesser reports which are unlikely to move the market such as Housing Price Index and Leading Indicators. The remainder of the calendar consists of bond announcements and auctions.
There are just over 20 companies reporting on the Earnings Calendar today. Looking through the list, I don’t see any market-moving reports.
Action Plan
Yesterday I suggested we could see choppy price action ahead of the FOMC and violent price action after. That turned out to be pretty much spot on, but even I was surprised by the violence of the post-announcement price action. Ultimately the Bulls won the day with the Dow with it 7th record-breaking high in as many days. Unfortuinatually the SPY, QQQ’s and IWM were unable to break out. With the DIA leading the way and its 9th day up it left behind a possible Hanging Man Candle Pattern. I used the word possible because would need a followthrough day to the downside to confirm the signal. No, follow through, and the candle is just a day of wild price action. The SPY and the QQQ are also left behind problematic daily candles if today happens to be a down day.
Currently, Dow futures are pointing to a flat to ever so slightly lower open. With the market ups so strongly I will have a focus on taking some profits particularly if some weakness develops. We are currently holding some very nice gains, and the last thing we want to do is allow the market to take them away. Guard against chasing into trades with the market so stretched on the back of the Dow alone. Only consider entering trades with low-risk at or very near price support levels.
Trade Wisely,
Doug
Interest Rates take center stage.
With the FOMC meeting concluding today interest rates take center stage today. It is reasonable to expect light volume and choppy price action until the statement is released. Normally after the statement, the market will react with very fast violent price action. Whipsaws are very common and wild price action may remain all the way through the Yellen press conference. Currently, all the overall market is bullish, and I would expect that remain so, but anything is possible after the FOMC. It would be wise to look over your positions making sure you have a plan. To simply rely on luck and good fortune is not good business.
On the Calendar
Today is a heavy news day on the Economic Calendar. Beginning at 10:00 AM Eastern we get a reading on Existing Home Sales. Forecasters see some improvement rising slightly to 5.480 million despite the Hurricane Harvey. At 10:30 AM we get the EAI Petroleum Status report which has seen a decline in supplies helping to lift the oil industry slightly. Let’s hope that trend continues to support these beleaguered stocks. After that it all about the FOMC and Janet Yellen. At 2:00 PM is the FOMC Announcement as well as the FOMC Forecasts followed by the Fed Chairs Press Conference at 2:30 PM.
On the Earnings Calendar, there are only 14 companies expected to report today. Let’s hope all report better than companies that reported yesterday.
Action Plan
The DIA which is now up eight days in a row again set a new record closing high. The QQQ’s and the SPY were both unable to break out a remained choppy as we were expecting due to the FOMC meeting. The IWM also closed at exactly the same price as the day before but still trying to test the-the July highs. Overall the indexes remain in a bullish trend thus I will continue to look for long trades taking advantage of the rising tide.
Futures are pointing to flat open this morning, and I would not be surprised to see light volume chop right up until the FOMC announcement. Anything is possible after the statement is released and the market reacts. Expect fast whipsaws and violent price action to occur. I doubt very much I will add any new risk until I see how the market is responding to the FOMC news. Please remember anything is possible and all traders should have a plan to protect profits and capital.
Trade Wisely,
Doug
FOMC Meeting Begins Today
The Bulls gave a very strong performance yesterday pushing the DIA once again to new record highs. A major influence in the rally was the strength shown in the financial sector ahead of the FOMC. The FOMC meeting begins today with the odds of an interest rate increase in December now above 60%. The market will be heavily focused on their statement tomorrow afternoon, and as such we could see some choppy price action as we wait. The rally is now 7-days old so it would be normal to see the market take a little rest or even experience a light volume pullback.
On the Calendar
The Tuesday Economic Calendar begins with Housing Starts at 8:30 AM Eastern. Forecasters are expecting a rise in August 1.173 annualized rate vs. 1.155 in July. Housing permits are expected to decline from 1.220 million vs. 1.223. Also at 10:00 AM is the less important Import Export Prices. Consensus has Import prices rising to 0.4% and Export prices falling by 0.2%, Of course, the big news on the calendar is that the FOMC begins their 2-day meeting with the announcement scheduled at 2 PM Eastern on Wednesday.
On the Earnings Calendar, w have just short of 20 companies reporting earnings today. The most notable today is ADBE, FDX, AZO, BBBY, and CPRT. Of those only BBBY reports before the bell while we will have to wait until after the close for the others.
Acton Plan
Once again the futures are pointing to a positive open today. The DIA and IWM both closed yesterday holding up quite strongly with the QQQ’s, and SPY struggled to hold the morning bullishness. With the FOMC beginning their meeting today it would not be surprising to see the market become choppy as it waits for their decision. There could also be some market tremors depending on the news out of the UN as Trump call for further action against North Korea today.
The overall trend of the market remains bullish, and as such I will look for new long trades. However, I do want to acknowledge that the run sharply higher the last seven trading days and rest or pullback are not out of the question. The last thing I want to do is to become overly long when the market is at new highs after such a strong run-up.
Trade Wisely,
Doug
