Bulls continue to display inspiration.

The 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 record breaking year continues.

Although 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

The Bulls may need a little rest.

There is no doubt about the strength of the Bulls and their dominance of the current market rally.  However, with such a big move all at once, the Bulls may need a little rest and are perhaps stretched thin.  A sideways move or even a slight pullback would not be out of the question and would technically be healthy for the market.  Allowing the moving averages some time to catch up and provide some price support.  Unfortunately, we still have that unstable dictator out there shooting off his mouth.  Yesterday stronger sanctions were passed, but he has already threatened retaliation and defiance as a result.  The old saying that one rotten apple spoils the entire barrel seems to apply here.  The Bulls are strong, but the North Korean rotten apple could spoil a perfectly good bull run.

On the Calendar

The hump day Economic Calendar begins with a couple of important reports.  First at 8:30 AM Eastern we get a reading of the PMI which has been among the weakest economic numbers.  As a result of Hurricane Harvey, the forecasters see a rebound to 0.3% gain vs. a 0.1% last month.  Next months report will see the effects of Irma.  Then at 10:30 AM we will get a reading on the EIA Petroleum Status Report.  Although they don’t forecast this number, many are expecting a sharp decline in supplies due to Hurricane Harvey.  At 2:00 PM is the Treasury Budget which consensus for August expects our government over spent by 115 billion.  However, this number is unlikely to move the markets.

On the Earnings Calendar, we have 34 companies reporting results today.  I don’t see any potential market movers, but please make sure you’re checking your account.  Suprisees here can be very costly!

Action Plan

New record high closes in DIA, SPY and QQQ’s were printed yesterday as the Bulls continue their show of strength.  Currently, the indexes appear to be slightly overbought in the short term.  At a minimum a rest is likely, but I would not rule out the possibility of a minor pullback.  The momentum of the current rally was very strong, and I would not be at all surprised to more record levels created before the end of the week.  Of course, that will depend on whether or not North Korea lights up another missile in defiance of newly imposed sanctions.

Currently, the Dow futures are pointing to a slightly lower open, but that could easily change.  With the market looking a bit stretched my plan for today will be to focus on current positions.  If the market happens to move lower, I may look to take some profits.

Trade Wisely,

Doug

Bulls are large and in charge.

I guess there is nothing quite like 2 of the most damaging storms in history to inspire the Bulls to run.  The theory is these storms will open the flood doors of Federal Spending for the cleanup and rebuilding.  All the rebuilding will also create big boosts in material and durable goods to rebuild the lives of those affected.  If there is one thing, the market loves its massive government spending no matter future consequences.  The Bulls are once again pushing for higher prints this morning with the futures pointing to a gap up of nearly 50 points in the Dow.  Clearly, the Bulls are large and in charge, but I would caution you about chasing.  If you missed this move then just let it happen.  Eventually, the market will rest or pull back providing lower risk entries rather than chasing an already overextended move.

On the Calendar

Another light day on the Economic Calendar with a single report of significance and several bond auctions.  At 10:00 AM we get the JOLTS report which tracks job openings.  Job openings have remained strong @ 6.163 million. However, hires have lagged behind at 5.356 million pointing to a tight labor market.  The consensus is expecting a slight pullback in offerings to 6.010 million in today’s report.

The Earnings Calendar has 27 companies expected to report today.  Overshadoweding earnings today is the unveiling of the highly anticipated Apple iPhone 8 at 10:00 AM Pacific Time.   Analysts expect this phone will finally contain major innovations.  Apple product release events in the past have moved the market so if this is a game changing device it could have a positive effect on price action.  On the other hand, if the company disappoints the opposite is also possible.

Action Plan

What’s the right move after the Dow rallies nearly 300 points in a single day followed by a gap higher the following day?  I won’t assume that I know what’s right for you, but I know for me it means to focus on profit taking rather than adding new risk.  Wild bullishness like this creates a lot of emotions.   The feeling of missing out causes a lot of traders to chase in just before the pullback.  Let’s be very clear here if you were not holding long positions last Friday then you have already missed it this move.  Jumping in today would be a very bad idea.  Wait for the market to rest or pullback and then enter at or near support rather than chasing and buying at price resistance.

Please understand I am not saying that the market can’t continue going higher before it pulls back.  It definitely can, but that is not a good reason to blindly follow like sheep.  A rest or a pullback will occur, and it will provide a better risk/reward trade.   Plan your trades careful and have defensible positions that fit your risk tolerance.

Trade Wisely,

Doug

The Bulls Stampede Upward

With hurricane Irma, continuing to create damage in Florida the Bulls stampede upward.  I guess the market wants to pick up the pieces and tally the costs later.  If you ever had a question as to whether the market has a concern for people, then clearly that answer is No!  The futures gap up this morning has the potential of creating whipsaw price action so plan accordingly.  Let’s also not forget the poison pill running around in North Korea.  I doubt our days of high volatility of over just yet.  Big moves like this create a lot of emotion.  Guard yourself by planning your trades carefully.  I can tell you chasing the market with the feeling I was missing out ended up costing a lot of money over the years.  Wait, plan, maintain your rules because that is where your edge lies.

On the Calendar

A very light Economic Calendar today with only one bill announcement and three bond auctions.

The Earnings Calendar is also very light with only 17 companies reporting result today.  A quick scan through them and I see nothing that would be market moving.

Action Plan

The last three days of market price action was nothing more than light volume chop in the indexes.  However, there were a remarkable number of good-looking charts and setups.  DIA, SPY, and QQQ are all successfully held important levels while IWM remained below the 50-SMA.  With North Korea remained quiet over the weekend the futures are pointing to an unbelievably strong open today.  As Irma continues to move through Florida leaving behind untold billions in damage in its wake, I’m honestly shocked by the market reaction.

Perhaps the market believed it was going to be much worse.  Over the long haul, the hurricane’s damage will likely boost the economy with all the rebuilding efforts and materials consumption.  The Dow is looking to gap up more than 100 points retail traders have a difficult decision to make.  Do they chase in risking potential whipsaws or do they wait for some of this emotion to subside.  Please keep in mind North Korea could upset the apple cart in about half a heart beat once again reversing the market.  It’s easy to forget that when we are looking at a 100 point gap.

As for me, I will continue to trade with the up trend, but I refuse to chase a gap near market highs.  The RWO portfolio has several long trades that should benefit from this gap up, so there is no need to chase.  Don’t get caught up in the emotion.  Wait for proper low-risk entries that fit your risk tolerance.  That way if the market does turn, your risk is manageable.  Make sure to plan each trade carefully.  If the market has decided it’s going to breakout to new highs, there will be more good entries than we could trade.  There is no need to rush.

Trade Wisley,

Doug

A weekend of uncertainty ahead.

As the market rallied at the end of the day yesterday, the temptation to add some positions was strong.  After all, there are so many good looking charts showing up, right!  But then I began to think about the weekend of uncertainty ahead and resisted the temptation.  Looking at the futures this morning pointing to sizeable gap down this morning the late day rally is looking more like a Bull trap.  After thinking it through, I am happy to have my account hedged with some DIA puts.  RWO members are holding some nice gains as the weekend approaches it would be wise to think about profits rather than adding new risk.  With all the uncertainty surrounding the market, we can rest well knowing the market will open again on Monday with loads of profit potential.

On the Calendar

The Friday Economic Calendar is giving us break with no market moving reports expected.  Before the market opens at 8:45 AM Eastern we have a Fed Speaker pontificating on interest rates.   At 10:00 AM there is a report from Wholesale Trade which forecasters see a rise in inventories.  We have the Oil Rig Count at 1:00 PM and Consumer Credit at 3:00 PM.  Unless there is some major surprise, none of the reports today are likely to move the market.

The Earnings Calendar is also very light today with only 15 companies expected to report this Friday.  A quick look through them I don’t see anything that would be market moving.  That, however, does not excuse you from checking them against your current holdings.  Relying on luck isn’t a wise way to manage your trading business.

Action Plan

The choppiness of the last couple days has been frustrating.  The Bulls and Bears have pretty much battled to a stalemate.  At the end of the day yesterday it looked like the Bulls were gaining an edge and I found myself wanting to predict the market was ready to move higher.  After all, there are a lot of very good looking charts in my qualified lists.  Finally, experience kicked in, and I started to consider the weekend ahead and all of the uncertainty facing the market.

As of now, the projections on Hurricane Irma could not be worse as this massive storm has the entire state of Florida targeted.  It’s hard to imagine, but if current projections are correct, Irma will affect the entire peninsula coast to coast.  The potential damage and economic disruption are truly staggering.  Then we have that pie-faced dictator with a bad haircut who loves spreading hate and discontent.  So as much as I would like to start buying up stocks my common sense is telling me to wait.  The market will be here Monday, and there is no need for me to be the first sheep through the gate.  If the Bulls do step in, there will more than enough opportunity to profit.

Trade Wisely,

Doug

Piles of uncertainty surround the market.

Even as the morning futures pump up team continues to try and inspire buyers to jump in piles of uncertainty surround the market.  From budget wrangling in D.C., Hurricane threats and a nut job with his finger on a nuclear button the market has a full plate.  I think we can expect some very fast moves in the market as these events unfold in our 24-hour news cycle.  Even a slight improvement in the track of Irma could inspire the Bulls just back in but if projects remain the same the opposite could be true.  The Governor of Florida as order evacuations due to this historic storm.  If I were governor of the market, I would order a temporary evacuation of the market for all inexperienced traders.  Please protect yourself until at least some of the uncertainty passes.

On the Calendar

Thursday’s Economic Calendar begins with the weekly Jobless Claims at 8:30 AM Eastern.  The expectation for this week is only slightly higher at 241K vs. 236K.  However, as the effects of Hurricane Harvey tally up this number could start moving up quickly.  Productivity and Costs also report at 8:30 AM which sees productivity rising 1.3% and labor costs edging higher by 0.3%.  At 11:00 AM we get the EIA Petroleum Status Report.  I would expect to show a decline in supplies even though it is unlikely to include the full effects of Harvey will likely not show up just yet.  We have a three Fed Speakers today, a few on-market moving reports and slew of bond announcements rounding out the calendar day.

On the Earnings Calendar 60 companies are expected to report today so stay on your toes and continue your due diligence.

Action Plan

Although we managed to bounce small bounce in the morning, the market remained mostly stuck in a very narrow range chop.  During the evening the futures were mostly lower, but the market pump up team has been hard at work.  Currently, the futures are pointing to a flat open, but that may be difficult to matain with the market facing so much uncertainty.

The DIA, SPY and the QQQ’s all remain above their 50-day averages, but price action is not exactly inspiring confidence.  I would rank the QQQ’s a the strongest of the indexes and IWM as the weakest which is once again below the 5- day average.  As more and more reports come in on Hurricane Irma, the chances that Florida will take a direct hit seem to grow.  Following this historic storm is another Hurricane named Jose that is growing in strength.  Add in the budget games playing out in D.C. and the growing tensions with North Korea, and it’s understandable that the market nerves are wearing thin.  Expect volatility with fast moves possible as news of these events unfold.  I recommend extreme caution and would suggest new or inexperienced trader simply wait for a bit more stability.

Trade Wisely,

Doug

The Bears delivered technical damage.

Although the bears delivered technical damage to the index charts overall supports held as did overall trends.  Ugly, yes but not a game changer as of now.  The emotional and psychological damage may turn out to be the most important damage created yesterday.  After getting their hands slapped several times trying to reach out for new highs, the Bulls may be a little hesitant to try it again without a little rest.  On the other side, the Bears may have become a bit more emboldened seeing an opportunity to test lower levels.  With all the uncertainty surrounding Noth Korea and Hurricane Irma swirling off the coast of Florida I think should plan for an extra dose of volatility.

On the Calendar

We get going this Wednesday on the Economic Calendar with International Trade at 8:30 AM Eastern.  Forecasters see this most important number of the day widening the trade gap to $44.6 billion vs. $43.6 on the last reading.   At 9:45 AM PMI Services which is the least important number of the day, but forecasters expect it to hold at a strong 56.9 level.  At 10:00 AM we get a reading on ISM Non-Mfg Index.  ISM issued a surprise drop in the index as growth in new orders declined.  However, forecasters expect a bounce back this month to 55.8 vs. 53.9.  The Federal Beige Book rounds out the calendar at 2:00 PM.  It is very unlikely for this report to move the market as a general rule.

It is still important to stay on top of your portfolio management with about 50 companies expected to report earnings today.  Don’t rely on luck, be prepared with a  plan.

Action Plan

Yesterday the uncertainty of North Korea was ramped up as the path of hurricane Irma now has the Florida coast in its path.  Irma has become one the strongest storms ever recorded in at see with sustained winds of 180 MHP.  Currently, it’s Category 5 storm with current projections that it still be a Cat. 4 by the time it makes landfall this weekend.  Of course, it could change course, but as of now, the uncertainty is not helping the market at all!

As bad as yesterdays move was an objective look at the index charts show that the DIA, QQQ, and the SPY remain above the 50-SMA.  They are also still in an overall uptrend, so I see yesterday as a warning shot across the bow but not a game changer just yet.  Having said that yesterday left behind some technical damage that may take some time to repair.  The big bearish candle left behind suggests will likely see a lower low in the near future.  Because of the very short term oversold look of yesterdays move a bounce, or at a minimum, resting seems possible this morning.   The VIX experienced a big spike up yesterday so we can expect some additional volatility.  I suggest it would be wise to exercise additional caution.  New or inexperienced traders should stand aside or perhaps practice in a paper account rather than engage in this battle.

Trade Wisely,

Doug

Uncertainty and Volatility

We have an up trending market that displayed a lot of bullish price action last week.  On the other hand, we have a North Korean leader playing with nukes and acting like he wants to pick a fight.  Mix in a President that has a Twitter account, that he’s not afraid to use and we end up with a lot of uncertainty right at the market highs.  Uncertainty and volatility are the likely results.  All weekend I have seen people trying to predict what happens next.  Some are claiming the market will ignore North Korea and we are going to the up.  I saw one ridiculous prediction that the Dow was going to 50,000.

Then there are the Gloom and Doomers predicting that the end is near and the market is destined to collapse.  Run for the hills!  There are others that suggest the market is setting a trading range that it could be in for years.  For what it worth I think predicting is a waste of time.  Predicting creates a bias, and bias can blind you to the clues that price is providing.  Predicting the market is a lot like trying to rope the wind.  It’s a lot of effort for nothing.  Focus on price and follow it when it shows a direction.

On the Calendar

This short week Economic Calendar begins and pretty much ends with Factory Orders at 10:00 AM Eastern.  Forecasters see a decline in Factory Orders of 3.1%  even though most of the underlying data would suggest strength.  An interesting discrepancy but the Factory Orders number is normally not expected to move the market substantially.  We have three Fed Speakers today and some bond auctions to round out today’s calendar.

There are on quite 30 companies on the Earnings Calendar today.  A quick look through them and I don’t see any market moving reports.  However, if you happen to hold a company that surprises you with a report because you failed to check it can be very damaging to your account.  Make sure always to check and be prepared with a plan around an earnings date.

Action Plan

Friday price left us with a little indecision while it rested ahead of the 3-day weekend.  This morning we have a bit of a conundrum.  Markets displayed incredible bullishness in the rally off the lows last week.  Both the QQQ’s and the SPY managed to break out while the DIA and IWM still have work to do.  Toss in the very risky game the North Korean leader is playing, and we end up with with a big pile of uncertainty.  I would like to think cooler heads will eventually prevail but the market hates uncertainty.  Dow futures are pointing to a gap down of more than 60 points at the open.  If the Bears take over, we could see failure patterns develop at market highs.  Not good!  If the Bulls step up to the plate and defend, we could strength in the rally.

The big question is, are you willing to speculate that you know the direction and willing to risk capital?  For me, the answer is no.  I will stand aside from entering new trades until price shows me clues of direction and then I will follow the winning team with higher probability trades.  We don’t have to take every day to be successful traders.  Also, we don’t have to pick exact tops and bottoms to be profitable.

Trade Wisely,

Doug