Gift of the Huge Gap

A market top or just a hesitation?  Clearly, traders opened the gift of the huge gap up open yesterday ringing the resister to protect profits.  Amid all the speculation that this was a market top lets remember that one day does not make a trend!  While it’s true, the market appears stretched and could benefit from a rest or pullback don’t expect the bulls to give up that easy.  There are several very big earnings reports today that could move the market, and I think most are expecting positive results.  Will it be enough to support this lofty market level is the question?  Higher volatility is likely as battle lines develop between the bulls and the bears.  Market sensitive is also likely as we move closer to a federal government closure unless Congress can get its act together.  The road ahead could have big potholes so make sure you have a well thought out plan.

On the Calendar

The Wednesday Economic Calender gets going at 9:15 AM with the latest reading on Industrial Production numbers.  Forecasters see industrial production rising 4.0 in December with total capacity utilization moving up to 2 tenths to 77.3%.   At 10:00 is the Housing Market Index which consensus is calling for a very slight for January to 73 vs. Decembers 74 reading.  Then at 2:00 PM, the Beige Book, comes out which is a report on economic conditions used at FOMC meetings.  We have three Fed Speakers today at 3:00 PM and 3:15 PM and finally 4:30 PM.  The report on Treasury International Capital which tracks the flow of financial instruments in an out of the U.S is released at 4:00 PM.

On the Earnings Calendar, we have 30 companies expected to report today, and several of them could be market moving.  Before the bell, we have GS, BAC, SCHW, FAST and USB.  After the bell, we will hear from, AA, FNLC, HBHC, and KMI.

Action Plan

Yesterday traders remembered the sell button location on their brokerage platforms taking advantage of the huge morning gap.  All four of the major indexes managed to set new record highs before selling began with the DIA breaking above 26K briefly.  As spooky as it might have seemed let’s keep in mind that a one-day pullback does not a trend make.  In fact, at the close of the day, all the major indexes are still above their rising trends.  What will be very important is if a follow-through day so selling occurs.  However, as I write this, the Dow futures are pointing to gap up of more than 120 points suggesting the bulls are prepared to fight.

Keep in mind; we have a bunch of big earnings report this morning that could move the market substantially before the market open.  Yesterday turned out to be one huge whipsaw, and I would not be at all surprised increased volatility continue for the next several trading days.  Price action around market highs can experience very fast reversals in either direction.  Also, remember the market could react sharply on the washing spin as we approach a federal government closure if a budget bill deal passes.

Trade Wisely,

Doug

Stampede of Bulls

The 2018 Stampede of Bulls rages onward and upward.  They have been running so long, and so hard you would think their hearts would soon explode.  Any bear that predicted they would soon stop has perished under their pounding hooves.  If you long the market stay long the market until price action clues suggest profit taking has begun.  If you’re on the sidelines then for goodness sake don’t let the fear of missing out convince you to chase this late in the rally.  As profits grow in such a strong bull run, so does the pressure on traders holding positions.  No one wants to sell to soon yet we all know a roll-over cold begin at any time.  My only advice, don’t allow greed get in the way of taking profits.  Consider scaling out to reduce the pressure and prevent emotional decision making.

On the Calendar

Only one important report on the Tuesday Economic Calendar.  At 8:30 AM the Empire State Mfg. Survey is expected to remain very strong at a consensus of 18.6 vs. Decembers 18.0 reading.   After that we have three bond auctions and believe it or not, no fed speakers.

On the Earnings Calendar, we have 23 companies stepping up to report quarterly results today.  Among them are UNH and CSX which both report before today’s bell.

Action Plan

Just when you think this market couldn’t get any more bullish, it does.  With 3-200 point days already this year, I believe this might be the strongest start to a year in my 28 years of trading.  Once again all four of the major averages closed at record high levels on Friday reacting to strong bank earnings.  Personally, I think the market seems excessively exuberant.  However, this morning futures are a perfect example of why it’s unwise to bet against such a strong trend.

As I write this, the Dow Futures are pointing to an opening gap of more than 200 points.  Who could have imagined that just 7-trading days after breaking through 25,000 the market could open above 26.000?  Remarkable bullishness indeed!  With such a massive gap up to new market highs chasing an entry would obviously be unwise.  Stay with the trend but also remain laser-focused on price action.  Logic would suggest profit taking could begin at any time but don’t try to predict when that might occur.

Trade Wisely,

Doug

Let the good times roll!

Yesterday I mentioned that I would not be surprised to see the rest and even slip into consolidation.  The Bulls obviously had other plans, setting new record highs in all the major indexes.  It seemed as if the entire world suddenly became worried that they were missing out and started buying with both hands.  Let the good times roll!

Yesterday’s rally was not only strong it was very widespread with strength even in microcap stocks.  As we head into the weekend, let’s not forget to take some profits and be thankful for the relative ease at which they occurred.

On the Calendar

The Friday Economic Calendar begins with two very important reports.  At 8:30 AM eastern is the Consumer Price Index which forecaster see rising 0.1%, less food and energy the and the number grows to 0.2%.  Year-on-year, the consensus gain is expected at 2.1% with the core at 1.7%.  Also at 8:30 is the very important Retail Sales that includes holiday spending.  December Retail sales expect an increase of a strong 0.5% with ex-auto sales at 0.4%.  10:00 AM brings the Business Inventories which forecasters see a 0.3% build for November inventories.  We have two Fed speakers today, one at 12:30 PM and another at 4:15 PM to close the calendar week.

On the Earnings Calendar, we have 18 companies reporting with the big banks in focus today.  Blackrock already reported very strong results and had increased their assets under management to a whopping six-trillion!  We will also hear from PNC, JPM, and WFC today.

Action Plan

The bulls were out in force yesterday closing all four of the major averages at new record highs.  Also, surprising was the strength across almost all sectors.  And it would appear that the bulls want even more with the Dow Futures currently pointing to a gap up of nearly 100 points.  Go, Bulls go!

As normal I will be much more focused on taking profits as we head into the weekend than adding additional risk.  We should also keep our emotions in check because all the rampant enthusiasm in the market it would be easy to chase an over-trade.  If you do add new trades today make sure you are entering low-risk positions that are at or near price support levels.  Don’t become complacent and stay focused on price action clues.  It may seem as is the market will never again selloff right now, but we all know the day is coming so stay focused.

Trade Wisely,

Doug

Resiliency

After bearish gap down yesterday the bulls proved their horns continue to very sharp recovering almost all of the losses.  The ViX indicated a little fear was creeping in at the open, but the resiliency of the bulls quickly began to put those fears to rest.  Market trends continue to be strong yet appear extended.  It’s very important not to over-trade or chase during periods like this.  Choose new trades wisely with low-risk entries and consider releasing the pressure on winning trades by taking at least partial profits.  With earnings season about to kick off plan for move volatility and overnight gaps as the market responds.  Focus on price action, stay disciplined to your rules and prepare for anything like the market continues to push the upper boundaries of this strong bull run.

On the Calendar

Thursday’s Economic Calendar kicks off at 8:30 AM with two potential market-moving reports.  First is the weekly jobless claims that are expected to decline 5000 to 245k vs. 250k.  Second is the PPI-FD which forecasters think will rise 0.2% vs. the 0.4% increases each month last quarter.  There are a couple of lessor reports and a bunch of bond announcements during the day but nothing likely to move the market until the 2:00 PM Treasury Budget.  The Treasury deficit is expected to come in at $36.0 billion for December.  Then at 3:30 we have a Fed speaker as their speaking tour continues.

On the Economic Calendar, we have 18-companies expected to report.  If very important to get into the habit of checking the reporting dates of stock you own an those that you are planning to purchase.  Failure to do so can be a very costly mistake that traders can easily avoid with a little preparation.

Action Plan

Yesterdays gap down was a wakeup call that the bears are still here and hungry.  However, the Bulls really went to work yesterday to recover most of the initial losses.  This morning the futures a suggesting a slightly higher but mostly flat open today.  Although there are some earnings today, the market could wait for the big bank earnings on Friday to look for inspiration.  Also on Friday, we get the very important CPI report and Retail Sales numbers which are both market-moving reports.  As a result, we could see light and choppy price action today as we wait.

The trends are still in place so I will continue to trade with the trend, but I will also take into account that the market appears extended when considering new risk.

Trade Wisely,

Doug

Who poked the Bear?

Okay, who poked the Bear?  Most reasonable thinking traders have expected a market pullback while secretly hoping the bears would not come back to work at least for a while longer.  After all who wants the party to end?  It seems unfair when the market makes an overnight reversal that traps the retail trader, but that is the nature of this business.  As an inexperienced trader, I would always try to assign blame to someone or something when I lost money on mornings like this one.  When the truth of the matter was the blame, was mine and mine alone.  When the market was super bullish, I would chase, trades like a madman never once evaluating the condition of the overall market.  Remember trading is a business and the buck always stops with you!

On the Calendar

The hump day Economic Calendar gets going at 8:30 AM with the Import and Export Prices.  Consensus for December has imports up 0.4% and export prices at 0.3%.  Talking about interest rates seems to be in vogue this week with four Fed speakers today.  Evans at 9:00 AM, Kaplin at 9:10 and then again at 10:15 with Bullard at 1:30 PM to finish up today’s tour.  At 10:30 AM is the EIA Petroleum Status Report which could be very important today with the recent rally in oil.

There are 14 companies expected to report today on the Earnings Calendar.  Front and center will be the builders with LEN reporting before the bell and KBH after the bell.  Remember the official kick off earnings session is Friday when several of the big banks report.

Action Plan

Yesterday saw yet another round of new record high closes in the DIA, SPY, and QQQ.  The IWM managed to break out, printing a new record high but then slipped back into consolidation.  I doubt anyone is all that surprised that the futures are finally pointing to a lower open this morning.  However, it’s always disappointing when it happens overnight traping retail traders.  Now the question is will it trigger some panic selling or will those tenacious bulls dig in to wait for earnings.

With the rally have been so strongly up you have to look at intra-day charts find price supports.  Keep in mind that potential reversals can create a lot of fast price action.  Violent whipsaws are possible if the emotions of fear or panic begin to well up.  Times like this can be very challenging for new or inexperienced traders so plan accordingly.

Trade Wisely,

Doug

The Bulls Keep Charging

The bulls keep charging upward trampling any bears that happened to step into their path.  I like some everyone else see the indexes as extend and common sense would suggest a rest of pullback should occur soon.  It took me a long time learn that when the bulls are this feisty that try to apply common sense left me standing on the sidelines and missing out on an extraordinary bull run.  I can only assume that money is pouring into funds and 401K plans because of the fear of missing out.  There are now analysis’s which have built a case for Dow 30,000.  If you think that can’t happen, just go back and study the late 90’s tech bull run.

Please understand that I am not predicting that will occur I’m only pointing out it has in the past, and the possibility exists.  Common Sense may not apply.  Stay with the trend but guard against complacency by having a plan to protect profits and capital if the bears return.  Remember reversals can be swift and brutal but a prepared trader and avoid the pitfalls of emotional trading.

On the Calendar

Tuesday’s Economic Calendar begins with a Fed Speaker at 10:00 AM followed directly by the Jolts report.  Consensus for November on job openings is expected to grow to 6.038 million.  With the country at seen at full employment, supports the concern that the lack of qualified workers is now limiting company growth.  After that, we only have a couple of bond auctions to close the economic calendar day.

On the Earnings Calendar, we have 13 companies reporting results.  Notable before the bell is AZZ and SCHN and after the close is WDFC and SNX.

Action Plan

After a slightly weak beginning to the trading day, the bulls once again showed their tenacity by pushing higher.  The DIA closed down a whopping 0.05% while the SPY, QQQ, and IWM pushed upward to set new record closing highs.  Go Bulls!  Currently, the Dow futures are pointing to a slightly higher open this morning.  Oil futures are also pushing higher this morning as winter demand continues to grow with the persistent cold temperatures around the country continue.

I fell like I’m beginning to sound like a broken record, but the bulls are still in control so I will say with the trend.  However, with the market looking as if its extended at least in the short-term we should closely monitor price action and have a plan ready if profit-taking begins.  The bears haven’t eaten in a very long time so given a chance expect them to bite at any time.

Trade Wisely,

Doug

Feed the Beast?

Last week the bulls ran like their tails were on fire and their hind ends were catching.  I saw a headline where Cramer said the market is in “Beast Mode.”  Okay, but I think the real question on the mind of most traders, is should they continue to feed the beast?  There is no question that the market seems extended and any reasonable thinking trader suspects a pullback could start at any time.  However, price action currently has no hint of stopping just yet.  We all know that predicting is unproductive as it could put you on the wrong side of the market or have you missing out on the best bull run of the year.  My suggestion is to say with the trend taking profits along the way and focus on price action for clues of a change.  Take only low-risk entries when adding risk and avoid chasing of any kind.  The trend is our friend, stay with it until it ends.

On the Calendar

Monday’s Economic Calendar seems focused on kicking off an FOMC speaking tour.  The is one before the market opens, one at 12:40 and another at 1:35.  We have a couple of small reports that are likely to go unnoticed by that market as well as two bond auctions to round out the day.

There are 11 companies on the Earnings Calendar expected to report day.  Although there are a couple of bigger companies, I would not expect any of them to be market moving.  Keep in mind earnings season officially kicks off on Friday with reports from Blackrock, PNC, JPM, and WFC.

Action Plan

The futures markets opened yesterday positively and have managed to maintain that sentiment all night.  New record high closes across all four of the major indexes as the bears seem to have gone into hibernation.  The Consumer Electronics Show kicked off last night with the CEO of NVDA as the keynote.  NVDA shares are indicated higher this morning and could make an all-time high.  The INTC CEO speaks this evening with most thinking they will extinguish the recent chip rumors.

Tech could be a driving force for the first part of this week due to the new coming out of CES, but it will quickly shift to the beginning of earnings season that officially kicks off on Friday.  As always I will continue to trade with the trend and focused on price action.  Having moved up so strongly last week, it would not be out of the question to see the market rest so watch closely for price action clues.  Also, remember gap up opens to new market highs can produce whipsaws and reversals so don’t chase.

Trade Wisely,

Doug

Bulls, bulls everywhere.

Look forward, and you see bulls.  Look right and left and you see bulls.  Bull, bulls everywhere and the only bears in sight lye trampled under the hooves of stampeding bulls.  Markets around the world are also moving higher caught up in the excitement.  The VIX is registering no fear as the futures once again point to another gap up open.  Even though everything seems to be coming up roses, I will do what I always do ahead of the weekend.  Go to the bank by some taking profits.  Let the good times roll but never forget to take profits along the way!

On the Calendar

The first Friday of 2018 has several important reports on the Economic Calendar.  Before the market opens, we get the biggest of these reports with the Employment Situation & International Trade at 8:30 AM Eastern.  Consensus for nonfarm payrolls is 191K and an unemployment rate unchanged at 4.1%.  Hourly earnings are expected to rise 0.3% with the average workweek hours bumping up slightly as well.  The International Trade deficit is expected to widen once again from October’s 48.7 billion to 50.0 billion.  10:00 AM brings the Factory Orders report which is seen rising 1.1% fueled mostly by aircraft orders.  Also at 10:00 is the non-manufacturing index which consensus expects a slight increase to 57.6 vs. 57.4 last month.  After that, we have three Fed Speakers at 10:15 AM, 12:30 PM and 1:00 PM.

We have 11 companies on the Earnings Calendar today.  Notable before the bell is STZ, HURC, and GBX.

Action Plan

Another day and another round of new record highs.  This time all 4-indexes pitched in with new closing all-time-high prints with the Dow slicing right through the 25,000 milestone.  Stampeding bulls for as far this eye can see.  Even the President chimed in by saying, I guess 30,000 is the new target!  As you might guessed the current futures action are suggesting the celebration will continue with a gap up of more than 70 points.

Now before you decide the market is never going down again and throw caution to the wind remember gap up opens to new market highs can also be blow off tops.  Don’t get me wrong I am in no way suggesting that will happen I’m only reminding that the possibility exists.  Also, gap up opens at market highs often have a tendency to create whipsaw price action.  The market is very bullish so stay with the trend just don’t get complacent.

Trade Wisely,

Doug

An amazing time to be a trader!

The bulls seem inspired to reach out to 25,000, and the VIX may be poised to make a new historic low.  Indeed, An amazing time to be a trader!  There is no fear in the market and money following to the market currently seems to be unending.  When times are this good, it’s very easy for traders to become complacent.  Take advantage of everything this bullish exuberance has to offer but maintain your focus and discipline.  It could happen today or years from now, but eventually, the tide will go out.  Be prepared, not surprised by always having a contingency plan.  Let the good times roll but always have your go bag packed an ready.

On the Calendar

The Thursday Economic Calendar gets going at 8:15 AM Eastern with the ADP Employment Report.  The ADP has lost much of its credibility this year having been glaringly wrong so much of the time.  ADP is expecting 188k in jobs growth in December.  At 8:30 AM we shift to Jobless Claims, which are expected to decline slightly to 240K this week.  The EIA Petroleum Status Report is at 11:00 AM today and will likely be the most potential market-moving report of the day.  They don’t forecast this number, but with the current rally in oil trader would the trend of supply reductions to continue.  There are several other lesser reports today as well as Bill Announcements and a Fed Speaker at 1:30 PM.

On the Earnings Calendar, there are 16 companies reporting today.  Notable is LK, MON, and PKE before the bell with PSMT and SONC after the bell.   I would not expect any of the earnings reports today to be particularly market-moving.

Action Plan

New all-time highs in the DIA, SPY, QQQ with IWM continued to lag behind in consolidation.  The Dow closed only 78 points below the huge round number of 25,000.  Futures are currently pointing to a Dow gap up of about 70 points this morning suggesting 25K will most likely give way to the bulls today.  I think the question is what happens when this major milestone occurs.  As always stay focused on price action for clues and try not to predict or trade your bias.

Clearly, the bulls are large and in charge, but there is also the potential stumbling blocks to be aware of today.  First, is how price will react to the big round number of 25K.  Will we blast right through with price holding it as support or will it become a significant level of resistance for the Dow?  Secondly, with the strong current rally underway in oil a surprise EIA Status showing a build in supplies could trip up this bull rally.  The VIX is very near all-time-lows suggesting no fear but don’t make the mistake of being complacent.  It is entirely possible with the gap up this morning that the VIX could set a new historic low.  Truly, an amazing time to be a trader!

Trade Wisely,

Doug

Day-1, SPY New Record High

If you ever had a question if the bulls still controlled the market that should have dissipated yesterday.  Day-1, SPY New Record High and the QQQ’s are not far behind.  A good reminder to never short a trending market.  Over the next three days, there is a lot of important economic data coming out, and I would be surprised if any of it is not supportive of current prices.  Also, keep in mind that Earnings Season is just around the corner and many stocks could rally in anticipation.  Only yesterday in the QQQ we saw how just how much analysis upgrades on key stocks can dramatically reverse an indexes direction.  By the way, analysts are bullish on earnings growth this year.

On the Calendar

The hump day Economic Calendar really gets going at 10:00 AM Eastern with the ISM Mfg. Index and Construction Spending.  Consensus for the December ISM is down just slightly to 58.0 vs. 58.2 last report but continues to be very strong.  Construction spending is expected to make a solid gain of 0.6% with residential spending leading the gains.  Then at 2:00 PM we have the release of the FOMC minutes.

There are 12 companies expected to report earnings today.  UNF & CNC report before the bell with RAD and RECN after the bell.  Make sure you are checking as part of your daily preparation.

Action Plan

The DIA, SPY, and IWM continue to remain in a chop zone however at the end of the trading day seemed to have found some bullish inspiration.  The QQQ, on the other hand, had an incredible day completely reversing a rather bearish appearance to a full on bullish stance.  I would expect the QQQ’s to make its first record high of 2018 very soon an accomplishment the SPY managed to pull off at the close yesterday.

Futures are currently pointing to more than a 40 point Dow gap up at the open.  Keep in mind a Dow 25,000 print is not that far away and after resting the last couple weeks may soon find the energy to make a push higher.  The VIX made a sharp decline yesterday afternoon and now looks like it could once again test historical lows.  There is no fear in this market.  Keep in mind that the market could easily slip into choppy price action after the morning rush as it waits for the release FOMC minutes.  Expect higher volatility right after the release as the market digests the new information.

Trade Wisely,

Doug