Defend Price Support

In yesterdays morning video I mentioned that it was going to very important for the Bulls to defend price support.  After a nail-biting dip below support to strip out tight stop-loss orders; the Bulls began to stand their ground and push back.  As always the important thing now is that they follow-through with a push higher and close the day above yesterdays high.  A failure to do will embolden the Bears and keep the current downtrend intact.  With a strong enough effort by the Bulls, a short squeeze could trigger if there are enough early short-hands betting against the market.

On the Calendar

Thursday’s Economic Calendar begins with three reports at 8:30 AM Eastern time.  The Weekly Jobless Claims consensus is for a reading 236K vs. the 239k last week.  Puerto Rico, however, remains a bit of wildcard on the jobless front.   The Philly Fed Mfg Index is expected to report 25.0 for November vs. the 27.9 October print.  The consensus for October Import prices is 0.4% with export prices expected at 0.1%.  At 9:15 AM forecasters are calling for 0.5% gain in Industrial Production for October with manufacturing production expected to increase by 0.3%.  Overall capacity utilization is seen rising to 76.3%.  The Housing Market Index at 10:00 AM is forecast to see November at 67 vs. the October 68 reading.

We have three Fed Speakers on the calendar today speaking at 9:15 AM, 1:10 PM, and 3:45 PM.  On the Earnings Calendar, we have just over 70 companies expected to report today.  Before the bell, we will hear from HP, SPLS & WMT and after the bell ROST, POST & GPS are just a few notables fessing up.

Action Plan

Yesterday saw the Bulls do a pretty good job of defending support levels on the DIA, SPY, and QQQs.  Unfortunately, the Bulls lacked the strength and motivation to fill the morning gap.  As of right now, the Dow Futures are suggesting a gap up of about 40 points but this earnings reports and a heavily laden Economic Calendar that could easily change.

As for me, I plan to continue exercising caution on new positions until I see the current short-term downtrend broken to the upside.  Of course, I will closely monitor current positions and prepared to take some profits as we move toward the weekend.  Remember volatility has increased so keep in mind fast intra-day swings are possible.  I’m guessing this week has produced a significant number of short sellers.  If the Bulls have the strength, this would be a very good place to trigger a short squeeze.  On the other hand, if the Bears maintain control, a failure here could create a rush for the doors.  I guess what I’m saying is be prepared for anything.

Trade Wisely,

Doug

Party Crashers

Unfortunately, the Bears have decided to be party crashers today with a mean overnight reversal.  I have over the last several days suggested raising caution levels and slowing market activity.  As there were temptations everywhere in the charts, it was very difficult to maintain discipline.  I stuck to my plan, and this morning I’m being rewarded for doing so because I have protected my capital.  The VIX will likely see a sharp rise this morning opening the door for some very fast price action.  I suggest new or inexperienced traders stand aside as the price action will likely become very challenging.  Remember CASH is a position and in times like this can be the very best position!

On the Calendar

We have a busy Economic Calendar today,  At 8:30 AM Eastern there are two very important potentially market-moving reports, Consumer Price Index and Retail Sales.  Forecasters see the overall CPI rising 0.1%.  Year-on-year is seen at 2.0% with the core number at 1.7%.  Retail Sales is looking for  October to rise by 0.1% as well with core readings as high as 0.4% indicating a fundamental strength in consumer spending.  Also at 8:30 the less important report from Empire State Mfg Survey.  Consensus expects a 26.0 reading for November vs. the October 30.2 which was a historic high for the Survey.

Business Inventories expected to rise 0.1% at 10:00 AM and at 10:30 the EIA Petroleum Status is expected to show a decline in overall demand.  Keep in mind the oil number can be a big market mover.  At 4:00 PM is the Treasury International Captial report as well as Fed speaker, but both are unlikely to move the overall market.  There are over 70 companies reporting earnings today on the Earnings Calendar so stay on your toes and continue checking dates.  TGT, TJX, and DKS will report before the bell placing a high focus on retail.

Action Plan

Another grinding day in the market yesterday where the Bulls pushed back after the morning gap down.  The rally back up looks to have been a Bull trap considering the current futures readings.  The clues in price action have been subtle however they have been there, and I have continued to suggest raising caution levels.  Currently, the Dow Futures are suggesting a gap down of more than 100 points.  Support levels in the DIA and SPY will require a strong Bull defense or could easily fail.  If it support levels happen to break, prepare for the possibility of a quick and nasty selloff as stop-loss orders begin to trip in rapid succession.  Expect a substantial increase in volatility at the open making for fast intra-day reversals and mean whipsaw price action possible.

The Bears appear to have gained at least a short-term upper hand, but I don’t expect the Bulls to give up without a fight.  Don’t panic, focus on your trade plan.  Consider taking profits on winning trades and allow stop-loss orders to protect your capital.  Avoid the urge to chase the gap and never involve yourself in revenge trading.  If your emotions seem out of control, then set your stops and walk away from your computer until your head for good business decisions returns.

Trade Wisely,

Doug

Bulls Step Up

After the gap down open it was nice to see the Bulls step up.   They left behind bullish candles in the DIA, SPY, and QQQ.  A very good sign but now it’s critical they follow-through to confirm.  After the morning rally, the bullishness seemed to die on the vine with light volume chop dominating the rest of the day.  A Concern? Maybe.  The VIX also seems to register a concern with a slightly higher close yesterday.

There is certainly no reason to panic.  As of now the trends in the market continue to be bullish. However, there is also a reason not to be complacent.  Plan your trades carefully and be diligent with your trade management.  Take some profits into strength and carefully manage stop loss orders.  Avoid over trading and make sure your trades are sized correctly to your risk tolerance.  Of course, this is a good course of action at all times saving your hard-earned capital and reducing emotional trading in the heat of the moment.

On the Calendar

Today on the Economic Calendar there are 2 Fed members and Janet Yellen speaking even before the market opens.  Such an ambitious group.  At 8:30 AM Eastern is the PPI-FD report.  For, October, forecasters are expecting a core 0.1% increase vs. the September increase of 0.4%.  Remove food and energy, and the number is 0.2% and remains the same with trade services excluded.

Today marks the last really big day of this earnings season.  There are 290 companies set to step up and report today.  HD, TJX, BZH, LMT & MBT are reporting just to name a few.  There are still a lot more earnings to come, but they roll out a  much slower pace going forward.

Action Plan

The DIA, SPY, and QQQ had a much better day with the Bulls stepping up after the gap down open and producing bullish engulfing candle patterns.  That is a very good sign but keep in mind; price must follow-through today to confirm.  Currently, futures are flat to slightly lower but with the PPI report and so many earnings reports that could easily change.

Currently, the trend is higher except for the poor IWM which just can’t seem to get its act together.  In the past, IWM has served as an early warning to future market direction.  I would never trade based on that signal but is a reminder not to become complacent in trade planning and risk management.  As good as yesterday was take note that the VIX didn’t respond by moving sharply lower but made a small gain.  Higher volatility can lead to quick reversals and challenging price action.

Trade Wisley,

Doug

No Follow-Through

Longer term the Bulls are still in control but a close look at the short-term and it’s the Bears with a slight upper hand.  Last Thursdays mean selloff and rally produced bullish hammer candle patterns, but as now, price, has not been able to follow-through to the upside.  The SPY and QQQ have made a nice attempt on Friday but at the end of the day fell just short.  As a result, I made no new buys on Friday and took more of a wait and see attitude.

With the VIX rising from historic lows we may experience some choppy price action with nasty whipsaws intra-day.  I would be careful not to chase trades (bullish or bearish) at the market open.  Stay very focused and flexible with well-planned trades to avoid emotional decisions in the heat of the moment.  If by chance the Bears do gain a firmer grip the VIX could spike quickly, and selling could accelerate.  That is why I will need to see the Bulls print a candle that breaks the high of the prior day before I add additional long risk.

On the Calendar

The Economic Calendar begins quietly but later in the week is full of important reports.  Other than some bond auctions there’s a 2:00 PM Treasury Budget report which is very unlikely to move the market.

On the Earnings Calendar, we are now showing just over 170 reports today.  A few noteworthy are FL, BBY, DKS, SFUN, DQ, ANF, WPRT, WUBA, SORL to name a few.  Continue to stay on top of reporting dates for companies you own or are considering for purchase.

Action Plan

The Futures market is starting trading last night in the green responding to a huge shopping and spending day in Asia.  At about 11:00, however, the bears came back out to play can currently suggest a gap down of more than 40 Dow points.  That would mean a gap below Friday’s low on the DIA and make a retest of the Thursday low a possible target.  The QQQ has been the strongest of the indexes while the IWM is obviously the weakest.

Overall the index trends in DIA, SPY, and QQQ are still bullish but are continuing to show some signs of stress.  The VIX is showing a slight increase in fear, but let’s keep in mind the all the earnings reports in the next couple days anything is possible.  A few good reports and Bulls may find their footing for a push higher.  A bullish candle that breaks the previous days high is the clue I will be watching hoping to see.  However, the Bears will maintain short-term control as long as lower higher candles continue.  I suggest a little caution in order and stay very focused on price action for clues.  Also, keep in mind with the VIX on the rise choppy price action with quick reversals are possible.

Trade Wisely,

Doug

Who invited the Bears to party?

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

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

On the Calendar

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

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

Action Plan

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

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

Trade Wisely,

Doug

It almost seems unfair!

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

On the Calendar

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

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

Action Plan

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

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

Trade Wisely,

Doug

Price Action Clues

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

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

On the Calendar

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

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

Action Plan

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

Trade Wisely,

Doug

No Fear

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

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

On the Calendar

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

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

Action Plan

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

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

Trade Wisely,

Doug

Back in the Saddle

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

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

On the Calendar

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

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

Action Plan

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

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

Trade Wisely,

Doug

Do you have an edge?

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

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

On the Calendar

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

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

Action Plan

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

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

Trade Wisely,

Doug