The Bulls may need a little rest.

The Bulls may need a little rest.

The Bulls may need a little restThere 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.

Bulls are large and in charge.

Bulls are large and in chargeI 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 Forward.

The Bulls Stampede Upward

The Bulls Stampede UpwardWith 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.

A weekend of uncertainty ahead.

weekend of uncertainty aheadAs 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.

Piles of uncertainty surround the market.

uncertaintyEven 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.

The Bears delivered technical damage.

technical damageAlthough 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

Uncertainty and Volatility

Uncertainty and VolatilityWe 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

New Record Highs in the Tech Sector.

New Record Highs in the Tech Sector.

New Record HighsWith an impressive display of strength, the Bulls managed to make new record highs in the tech sector once again.  It’s as if North Korea disappeared and the devastation on the southern coast never happened.  The Bulls are large and in charge as we begin September.  Futures are suggesting yet another gap up, and the VIX is once again testing historical lows.  As we say all the time, “Trade with the trend until the trend ends” and the trend except for the IWM is up.  With a gap at or near new market highs always watch for possible whipsaw price action.  I’m not saying it is, but it’s the perfect place to set a bull trap much like the gap down on the 29th turned into a Bear trap.

On the Calendar

The Friday Economic Calendar kicks off with the granddaddy report of the month.  Before the market opens at 8:30 AM Eastern the Employment Situation Report is released.  Forecasters are looking for this number to cool off to 180K vs. the 231K reading last month.  At 9:45 we get the PMI Mfg Index which last month was 53.3, but there seems to be no forecast for this month.  At 10:00 AM the ISM Mfg numbers is the other big number today that could move the market.  The ISM August consensus is calling for continued strength at 56.6 vs. 56.3 in July.  Construction Spending and Consumer Sentiment is also at 10:00 AM today.  Construction Spending is expected to bounce higher today.  The consensus of Consumer Sentiment suggests it likely diminishes slightly to a 97.4 reading.

On the Earnings Calendar, there are less than 20 companies expected to report today.  I would expect none of them to be market moving, but please continue to check your holdings as part of your morning prep.

Action Plan

With three days of amazing bullish strength, the QQQ set a new record high yesterday with buying right into the close.  The SPY was also very impressive however it continues to remain under price resistance although very near new highs.  The DIA decided to take a siesta yesterday after gapping up choosing to just lounge around in a small chop zone.  And although the IWM still has a lot of recovering to do it also pushed up strongly to test resistance levels.

With the Bulls continuing to push on the futures, it is pointing to a gap up of more than 50 Dow points.  Personally, I don’t want to chase the gap at or near market highs.  I will focus on the price action after the open looking for follow through buying before deciding to add new positions.  Because this is Friday and we have had an amazing reversal I will be planning to take some profits today before the weekend.  With the Bull running hard the VIX has dropped back into the zone of historic lows.  When there is no fear, big moves are possible but also know they can also be very volatile.

Trade Wisely,

Doug

The Bulls are back in town.

The Bulls are back in town.

The Bulls are back in townAfter a tough battle at price resistance in the morning, the Bulls finally gained the upper hand about midday.  Resistance levels and even some down trend levels gave way.  We can now officially say the Bulls are back in town and at least for now seem to be in control.  Historically August and September are tough months in the market, but there has been nothing typical about this year.  As normal I will caution you about chasing the morning gap, but it now looks to me that new record market highs are possible in very near future.  The massive damage in Houston what I assume create productivity losses and likely rising jobless claims, but this currently is being completely ignored by the market.  That may be a little shocking but not all that surprising with the wildly bullish nature this market has displayed.  The VIX is once again showing a remarkable lack of fear or as some might suggest complacency.  Enjoy it and profit from it just don’t be lulled to sleep by it.

On the Calendar

We begin today’s Economic Calendar with the weekly Jobless Claims at 8:30 AM Eastern.  Claims have held steady at historic lows this summer, and forecasters see that continuing but up slightly to 237K.  Also at 8:30 AM we get a reading on the Personal Income and Outlays which was weak in June.  However, the consensus is expecting an increase of 0.4% in both income and spending today.  At 9:45 is the Chicago PMI which pulled back slightly from a 3-year high in July.  August consensus is expecting another slight decline to 58.6 which is still very strong overall on order and backlogs.  At 10:00 is Pending Home Sales which forecasters see rising 0.4% from the July number.

There are more than 50 companies on the Earnings Calendar expected to report results today.  Retail seems to be a theme today with DG, LE, LULU, and BEBE on the schedule.  Also reporting today is big blue chipper CPB.

Action Plan

Yesterday the market seemed to struggle until about midday when the Bulls finally began to over run the Bears at resistance.  Not only did the Bears give up resistance levels but by the end of the day, even some of the down trend levels gave way to the buying.  We are not completely out of the woods with more resistance levels above, but Bulls seem to have regained control of market direction.  This morning the Dow Futures are pointing at least a 50 point gap up.  As always a will caution you about chasing a gap when we are at or near market highs.  It’s the perfect place to find whipsaw price action and set Bull traps.  Wait to see if there is follow through buying before adding new risk.

Currently, we are in some great positions with 70% gains in X, 50% gains in TECK, very nice profits in the BRKB.  We are holding small gains in FCX, and GRUB.  Even our new position in MSFT closed the day with gains.  As we head into the weekend, don’t forget to take some profits.  Selling into strength is a trait of consistently profitable traders.  Don’t allow greed to prevent you from getting paid for your hard work.  As long as this morning gap holds, I will be looking for new long positions entries but protecting current gains will be at the top of my list of priorities.

Trade Wisely,

Doug

Big beautiful bullish candle.

Big beautiful bullish candle.

Big beautiful bullish candleYesterdays, big beautiful bullish candle, rejected the low with considerable strength.  Unfortunately, all of the indexes remained just below resistance, so it was not a game changer just yet.  A one day move can be the clue to a directional change but it in no way confirms a rally is at hand.  For that to happen, we need a follow though that breaks and holds resistance.  We can easily have the morning pop break the resistance level and create a lot of emotion.  However, until we see actual buying stepping in to support the breakout and following through then all we had yesterday was a nice move inside a chop zone.  I hope this is bullish; I want it to be bullish!  Experience and discipline to follow my plan prevent me from chasing hope.  Show me follow though, and I will gladly get on board the Bull train.  As of right now, price, is still below resistance and a current downtrend continues to exist.  Keep that in mind as you plan your day.

On the Calendar

We start off the Economic Calendar with the ADP Employment Report at 8:15 AM Eastern time.  The ADP number has missed the mark wildly several times this year.  Last month they did call for an increase in the payrolls, but it was still quite short.  This month the ADP consensus is again to see an improvement but to 185K.  At 8:30 AM we latest read on the GDP.  Consensus sees an improvement to 2.8% as the second estimate for the second quarter.  The GDP number is also expected to show a slight improvement in consumer spending to 3% which is a good sign for the economy.  AT 10:30 we will hear from the EIA Petroleum Status Report.  Once again we need to see a decline in supplies if want the oil companies to support the overall market and begin to recover.

The Earnings Calendar has just short of 70 companies reporting earnings today so stay on your toes!  Also, keep in mind that we have the big  Employment Situation number on Friday morning.  It is not abnormal to see the market get choppy with light volume as we wait for that number.  Also, keep in mind with the Labor Day just around the corner many of the big guys could begin taking off the Hamptons early for an extended weekend.

Action Plan

Yesterday the markets showed some surprising strength shaking off the concerns of North Korea and jumping into rally mode.  All four of the major indexes left behind encouraging bullish candles.  As nice as that for to see all they did is move up to challenge resistance levels without actually breaking out.  So today it’s all about the follow-through to confirm yesterdays move.  A big, beautiful bullish candle with out follow-through below price resistance would turn out as nothing more than a good day within a chop zone.  Currently, the futures are pointing to a positive open so let’s hope we do see the Bulls step up and provide a little more confidence in direction.

As for me, and the members of RWO, we are holding some very nice gains in several positions.  A continued bullish move would most likely only improve our profits.  I will, however, need to see some real buying after the morning pop before I consider adding new positions.   If the Bears happened to reassert themselves here at resistance, then I want to be prepared to take some profits off the table.  I guess what I’m trying to say is don’t be blinded by yesterdays bullish candle.  Look at the overall chart and acknowledge that we are still in a downtrend and below resistance.  There is no good reason to speculate if this is the bottom or not.  Wait for it to prove and prepare a plan to react once it has proved.  That alone will improve your Win/Loss Ratio!

Trade Wisely,

Doug