Bullish But Stretched

Bullish But Stretched

Bullish But Stretched

Bullish But StretchedThere 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.

The Bulls continue their march higher.

Bulls continue their march higherAfter 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.

Bullish but slightly apprehensiveBullish 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.

Saber rattling intensifies.

Saber rattling intensifiesAs 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

7th Straight DIA Record

7th Straight DIA RecordAfter 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.

Interest Rates take center stage.

Interest Rates take center stageWith 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

FOMC Meeting Begins Today

FOMC Meeting Begins TodayThe 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

Bulls continue to display inspiration.

Bulls continue to display inspiration.

Bulls continue to display inspirationThe apparent progress from the beltway on Tax Reform has raised hopefulness of success.  As a result, the Bulls continue to display inspiration pushing the Dow Futures up more than 50 points.  Personally, I don’t like chasing a gap up to new market highs, but it is undebatable that the overall market is trending up.  Thus, I must continue to trade with the trend and look for new trades showing bullish trends for entries.  Because we have rallied very strongly, I will also be on the lookout of for clues to a pullback or consolidation.

As we trade this trend we have to keep our head on a swivel and expect quick volatility as the tensions with North Korea continue to grow.  Over the weekend the US practiced bombing drills over the Korean peninsula.  I suspect the patients of the White House is beginning to wear thin with the Korean leader continuing to display unstable defiance.  Trade with the trend but have a plan for the potential volatility.

On the Calendar

This week’s Economic Calendar is heavily laden with very important reports, but we began with a light day.  At 10:00 AM eastern is the Housing Market Index which is expected to fall at least 3 points to 65 due, to hurricane impacts.  However, the low estimate sees a very sharp decline all the way down to 53.   At 4:00 PM is the Treasury International Capital which would be very unlikely to move the market.  Other than that we have a couple of bond auctions and a single announcement to fill out the day.

On the Economic Calendar, there are less than 20 companies reporting earnings today, and I don’t expect any market-moving reports.  Keep in mind today is the QQQ Ex-dividend date.  If you are not yet into the habit of check earnings report on the positions that you hold or are thinking about buying now, is a good time to get started.  Before you know it, we begin fourth quarter reports and there will 100’s or reports daily.

Action Plan

We finished last week with all the major indexes showing strength and the DIA’s setting another new record.  Although the market continues to look over-stretched, the Dow Futures are pointing to yet another gap higher due to hopeful news out of Washington D.C.  All of a sudden there seems to be some progress on the beltway in regards to a highly desired tax reduction package.  The FOMC also meets this week, and forecasters see a 60% or better chance of another interest rate increase in December.  It is also expected they begin an unwinding their massive balance sheet in 10 billion dollar increments.  There will be a lot of eyes on this meeting.

The trend of the market is obviously up, and as a result, I will continue to trade long and look for new long trades.  However, I will be sensitive to the fact that market could soon require a little rest or pullback after moving up so strongly.  Of course news at of D.C. or the increasing tensions with North Korea and Iran could quickly change all expectations.

Trade Wisely,

Doug

The market faces a weekend of uncertainty.

The market faces a weekend of uncertainty.

weekend of uncertaintyA mad man who believes he is a god with the power of nuclear weapons at his disposal and the temperament of a misguided teenager.  What could go wrong with that?  Obviously, the market faces a weekend of uncertainty as the UN gathers for an emergency meeting to discuss the escalation of threat.  The futures reacted lower after the launch of the missile but had recovered overnight.  I wonder if they will be able to hold the market up all day?  I have to assume many will be looking to reduce their exposure ahead of the weekend.  The volatility of this market is very difficult to trade.  Please have a plan to protect your capital.

On the Calendar

A busy Friday Economic Calendar begins with the very important Retail Sales report at 8:30 AM Eastern.  The expectation is for an increase of only  0.1 vs. 0.6 due to Hurricane Harvey impacts.  Also at 8:30 AM we get the latest reading on the Empire State Mfg Survey which is expected to decline to 19.0 vs. 25.2 last month.  Industrial Production at 9:15 AM is another very important number which is expected to lift by 0.1% vs. a decline last month.  Then at 10:00 AM we get Business Inventories and Consumer Sentiment.  Forecasters see an increase in Inventories of 0.2% and a slight decline in Sentiment to 96.0 vs. 96.8 last reading.

There are only nine companies reporting earning on the Calendar today.  Also worth noting is that both the DIA and SPY pay quarterly dividends today which can have a slight impact on their prices.

Action Plan

In the act of defiance, North Korea fired another missile over the head of Japan.  This one went considerably higher and farther than previous launches.  Yesterday test proved they now can strike Guam once again raising the stakes in this very dangerous game.  South Korea responded with their own missile launch and running military drills near the border also escalating tensions.  The futures began to quickly drop but have bounced back to a flat reading this morning.

Now my question is will the market hold up as we head into a weekend filled with uncertainty?   As for me, I will be laser focused on price action and prepared to take action on any hints of failure.  Taking on new risk ahead of this weekend is not impossible but very unlikely due to the current circumstances.  I will not hesitate to capture gains if I see clues of the selloff and I may even look to take some gains simply to reduce my risk ahead of the weekend.  We are dealing with a very unstable North Korean leader which makes him very dangerous and unpredictable.  Of course, that does not mix well with markets.

Trade Wisely,

Doug

 

The record breaking year continues.

The record breaking year continues.

The record breaking year continuesAlthough the market seems stretched the Bulls continue to charge upward and the record breaking year continues.  Eventually, the momentum of this rally will fade, but as of now, the Bulls are firmly in control.  Rather than chasing new positions I want to focus on profit taking as we head toward the weekend.  Selling into strength as the market becomes stretched is a trait of successful traders.  New or inexperienced traders are feeling the pressure of missing out often make the mistake of chasing market highs.  Take from one that made that painful mistake over and over.  If you’re not already in positions taking advantage of the rally, it would be wise to wait.  There are a lot of great looking charts.  If you can enter them at low-risk entry points okay but keep in mind it will be difficult for them to rally is the overall market does pull back.  Make sure you have a plan.

On the Calendar

Thursdays Economic Calendar kicks off with Consumer Price Index at 8:30 AM Eastern.  The consensus is expecting a 0.3% increase month vs. the 1% rise previously.  The spike in prices is yet another impact  Hurricane Harvey is having in the country.  The tally for Hurricane Irma is unknown at this time.  Also at 8:30 AM is the weekly jobless claims which surprised the market due to the surge of 62,000 new claims.  The consensus is for some 302K claims today, and this number is expected to continue to rise over the next several weeks.  Once again the effects of Harvey and Irma.  There are several other reports today but nothing considered to be market moving.

On the Earning s Calendar, we have 35 companies reporting results today.  One of the bigger stocks to report today is ORCL.  A good report could give the QQQ’s a little boost.

Action Plan

The indexes continue to defy gravity as the momentum of this rally continues to attract buyers.  Once again new records were set in the DIA, SPY and the QQQ’s while the IWM continued to rally testing resistance levels.  As we continue to melt up once again, the VIX is nearing historic lows raising the slight concern of complacency.

The trend is up so I will continue to trade long and continue looking for long positions.  Although the market seems very stretched as of right now, there are no clues in the price action of a direction change.  Common sense, however, would suggest a rest or pullback could come at any time.  Don’t predict it just focus on the price action for the clues and stay with the trend.

Trade Wisley,

Doug