The Bulls are back in town.
After 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.
Yesterdays, 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
Who let the Bears out?
The market has obviously been showing weakness, and I have been expressing the use of Caution for some time now. So who let the Bears out today? That blame falls right on that puffy little dictator in North Korea by firing a ballistic missile over the top Japan. As luck would have it our shoot from the hip president has been quiet about the subject with no antagonistic Twitter posts. Perhaps he has learned the error of his ways, but it could also have gone quiet as the US plans its military response. Either way, the market hates uncertainty, and this action creates more questions than answers. Be very careful my friends. Expect a major injection in volatility which can create big swings both up and down making a dangerous environment for most traders.
On the Calendar
The Economic Calendar gets going at 9:00 AM Eastern with the S&P Corelogic – Case -Shiller HPI. I think the first thing they need to do is find a new name for this report! LOL. The Consensus for June is to remain strong with an 3% increase, with the year on year number coming in at 5.8. At 10:00 AM we get the Consumer Confidence report which has been beating consensus in recent months. The July number was very strong at 121.1, but forecasters are calling for a pullback to 120.6 in August. The calendar rounds out with a couple more nonconsequential reports and bond auctions.
Today on the Earnings Calendar we have about 50 companies reporting. Make sure you continue checking the companies you hold or are considering for purchase. It’s very easy to forget about earnings this late into the season and get caught in with a nasty surprise. Make checking for earnings a habit of your daily planning as well as you individual trade planning.
Action Plan
Yesterday the morning futures pump by the big boys created yet another pop and drop in the price action right at resistance levels. I hope everyone is beginning to see clues to this type of price action and learning to wait for confirmation rather than chasing the morning pump. Add in the drama that the financial news creates and a trader can easily make poor emotionally based decisions. Take it from a former yo-yo trader that would allow time like this to chop my account to pieces and destroy my confidence.
Today the futures are pointing to a triple digit gap down in the Dow as the market reacts to the actions of the North Korean dictator. Firing a ballistic missile over Japan would seem to prove just how unstable he has become. The market hates uncertainty so we can expect volatility to ramp up making it difficult to trade. Unfortunately, the major index charts are in a position that a sharp sell off only serves to increase the technical damage. It will also reinforce the emerging downtrends with yet another failure at a lower high. The danger of a substantial seems to be growing so plan according and protect your capital.
Trade Wisley,
Doug
Sorry everyone but there will not be a morning blog post today.
Will Yellen inspire the Bulls or the Bears?
The speeches out of the Jackson Hole gathering are always important, but it seems that this year all eyes are focused on the event. Expect a lot of volatility around the Yellen and Draugi speeches. The big question is which team will be inspired, the Bulls or the Bears? As they talk, expect quick price fluctuations in both directions as the market reacts to every syllable they deliver. A direction may be determined today, but the problem is we have no idea which way that will be. Currently, the index charts and the transports are not showing much confidence, but that could change quickly or become much worse as they speak. Be very cautious.
On the Calendar
The Economic Calendar on this last day of the week has a couple of heavy hitters this morning. First up to the plate is the Durable Good Orders at 8:30 AM Eastern. This number has had some volatility with a big 6.5% rise in June followed by a 5.8% decline in July. Underneath all the bumpiness Durable Goods orders have been strong and are expected to stay so for today’s reading. At 10:00 AM we get a speech from the Fed Chair from the Jackson Hole Symposium. Some are suggesting she will deliver a historic speech clearing the way for more rate increases. Others speculate the big speech will come from Mario Draugi around 3:00 PM. Suffice it to say the world is watching and waiting to react to every utterance they deliver.
The Economic Calendar only has about 20 reports expected today. I quickly looked through them and didn’t see any that I would deem as market moving reports. However, it is still very important for everyone to stay on your toes checking for reporting dates of those you own or are thinking of adding to your portfolio.
Action Plan
Yesterday I warned of the possible pop and in the morning and unfortunately, this is exactly how it played out. Please understand that was not a prediction but merely an observation of the price action that gave me the clues. After the initial volatility, the market became very choppily and flat. If I were to venture a guess why; it would be because everyone is waiting for the Yellen Speech at 10:00 AM eastern today.
With so my eyes on these speeches and so much speculation as to what they may or may not say we should expect some considerable volatility as they begin to speak. Don’t be surprised to big reactions whipsaw price action as the market reacts to every utterance. The good news is the stalemate between the Bulls and Bears could end today. The bad news is we have no idea which team will come out the winner. Be very cautious!
As normal I will be much more focused on taking profits ahead of the weekend than looking for new trades. However, if by chance a direction is made clear, I will be prepared to act. Over all the index charts currently do not look very healthy so once again I will say be very cautious.
Trade Wisely,
Doug
Bulls and Bears in a dead heat at resistance.
At the open yesterday, it appeared that the Bears were taking control, but Bulls fought back with equal vigor. As a result, the day ended with the Bull and Bears locked in a virtual dead heat. All the major indexes, however, remained under resistance and short-term downtrends remain in tact. A stalemate just below resistance is not the place to be actively adding risk. Always remember anything is possible and don’t assume you can predict the outcome. If you do decide to trade, I suggest keeping positions smaller than normal until you see the Bulls gaining the upper hand. Also, have a plan to protect current profits and cut losses quickly if the Bears gain the upper hand.
On the Calendar
We kick off the Thursday Economic Calendar with the Weekly Jobless Claims number at 8:30 AM Eastern. Normally we would have seen an increase in Jobless numbers this time of year due to the annual auto retooling. However, this year claims have held steady at historic low levels. Forecasters are expecting to see an increase this week to 237K vs. 232K on the last reading. At 10:00 AM we get a reading from Existing Home Sales which are expected to rise to 5.565 million annualized rate vs. the 5.520 in the last report. After that, we have a few reports that are very unlikely to influence the market and a bunch of bill/note announcements.
On the Earnings Calendar, we have nearly 80 companies expected to report today. Retailers play a prominent role today with reports from ANF, BURL, DLTR, FLWS, and SHLD all reporting before the bell. It’s been a rough quarter for retail so let’s hope we can begin to see that trend change today.
Action Plan
After the morning gap down the Bull attempted a rally but near resistance levels, they seemed equally matched by the Bears. Sideways choppy price action most of the day was the result. Resistance levels continue to hold as does the newly developed technical downtrend. Currently, futures are pointing to a slightly higher open, but as of now, it appears to be less than yesterdays highs. Perhaps today’s economic and earnings data will provide some directional inspiration after the open.
Currently, I am holding some nice gains in several positions and yesterday during the daily live session I picked up a few DIA and SPY puts. Please understand I am not trying to predict the market is about to fall with the put purchase. I am merely adding a little hedge to lower my long exposure to the market. As we approach the weekend, I will have a focus on taking some profits. With the overall market testing resistance, I will also be very focused on price action. I want to be prepared to act if the Bulls break through resistance or if the Bears gain the edge on this battle ground.
Trade Wisely,
Doug
Relief rally, not a game changer yet.
Yesterday it was nice to have such a strong bullish move and relieve some of the bearish pressure. Unfortunately, the relief rally was not a game changer. The indexes closed the day below resistance levels and continued to remain under the current downtrends. The Bulls still have a lot of work to do if they are to regain control and I suspect the Bears still have some fight in them.
A mistake I used to make was to focus too closely on the hard right edge of the chart. Yesterdays, bullish move would have me tossing caution to the wind, and I would buy stocks with both hands severely over trading the market condition. If the market turned, I would suffer big losses damage not only my account but also crush my confidence as a trader. My suggestion, if you do trade, consider smaller than normal positions to control the risk. Also be mentally prepared to exit trades quickly should the market begin to turn against you. Be willing to take small gains and cut off losses quickly if you suddenly find yourself on the wrong side of the battlefield.
On the Calendar
The hump day Economic Calendar kicks off at 9:45 AM with the PMI Composite Flash report. The consensus is expecting a moderate but constructive growth with services continuing to outpace manufacturing. At 10:00 AM we get the latest reading on New Home Sales which forecasters are expecting to remain flat at the July 610K print. 10:30 AM the very important EIA Petroleum Status Report. The last reading showed a decline in inventories, but crude continues to struggle under selling pressure. There is no forecast for this number, so all we can do is wait and hope it will continue to decline and supporting prices.
The Earnings Calendar has just over 50 companies reporting 3rd quarter results. There are several details in the list today with LOW being the most notable and heavily watched. LOW will report before the bell.
Action Plan
Yesterday all the major indexes caught a relief rally that was quite strong and leaving behind an open gap. The DIA, SPY and QQQ’s, all left behind a candle pattern loosely interpreted as a Morning Star. As good as that would seem the indexes are still not out of danger. First, this pattern requires follow-through. Price action to be valid. Secondly, all the indexes closed below. Short-term down trends as well price resistance. The questions now, will the Bulls have the moxie to push through the resistance? I suspect the Bears will have something to say about that mounting a defense. It should be an interesting battle.
Currently, the futures are pointing to a lower open which is not a surprise after such a big move. There are a lot of good charts flashing buy signals after yesterdays move. While I am long the market, I want to remain very cautious. For me, that means I want to be careful to not over trade during this market condition. I will normally begin with smaller than normal positions to reduce my risk. I will also be prepared to take any profits much faster should the overall market show clues of failure. If the Bears happen to regain control, a very quick sell off is possible, so plan accordingly and remain focused on the price action after the open.
Trade Wisely,
Doug
Can the Bulls repair the technical damage?
While many traders are focused on the what will happen today, I am honestly more concerned with the overall technical damage in the charts. Today we may bounce, but the big questions are will the Bulls have the energy to repair the price damage. If we do rally, I will be keenly focused on the on the price action as we approach resistance levels. In my heart of hearts, I want the Bulls to remain in control and buy the dip, but I won’t risk my money on hope or guesses. I will need to see proof, and that may take a little time to develop. Twenty-seven years experience has taught me that there is no need to rush. If I can control my emotions, wait and watch, I get better trades, and my win/loss ratio can continue to average around 70%. You don’t have to trade every day to be a successful full-time trader!
On the Calendar
Tuesdays Economic Calander is another very light one. At 9:00 Am Eastern is the FHFA House Price Index followed by the Richmond Fed Manufacturing Index at 10:00. Both are really not-consequential reports having little chance of moving the market. Rounding out the calendar day is a 4-week bond auction.
Over 60 companies grace the Earnings Calendar today with their quarterly results. INTU, MOMO, and TOL, CRM and AABA may be extra notable for some of the members. Make sure you are checking the reporting date of all companies that affect your portfolio.
Action Plan
As I was out playing with telescopes and photographing the eclipse yesterday, I was not following along intraday as normal. Although the DIA failed the 50-day average during the day making a new low the Bull managed to stage enough of a rally to recover price and close above this important support level. The SPY, QQQ’s and the IWM all staged a late day rallies but remain under key moving averages. I suspect the market will bounce and the current futures are pointing to a slight gap up. However, other than the DIA the indexes are in a precarious position. Any rally back toward resistance levels could produce failure patterns continuing the current downtrends.
As you all know, I try to avoid prediction of any kind. I simply want to follow price when evidence of direction supported by actual buyers or sellers. As a result, I will likely give the market 20 to 30 minutes to digest the morning rush before making any trading decisions today. Of course, the top order of business is to manage current positions protecting profits and trading capital.
Trade Wisely,
Doug
The Bears have their nose in the door.
With the follow through selling on Friday, it would appear the Bears have their nose in the door and smell a tasty opportunity. The Bulls will have their work cut out for them with the significant technical damage that has now occurred in three of the major indexes. A short-term oversold condition exists, and a bullish bounce is likely to begin soon. However, I would not assume the down trend is over. Any bounce or rally back to resistance could set up more selling. If you do decide to trade, keep that in mind as you plan the position. Technical damage such as this not likely to be repaired quickly. There is no rush. Wait for a defensible entry with solid evidence that the bulls are regaining control before risking your hard-earned money!
On the Calendar
It looks as if the Economic Calendar has decided to take most of the day off to watch the eclipse. At 8:30 AM Eastern there is a single report from Chicago Fed National Activity Index. As a general rule, this report will not move the market. Other than that we have a bill announcement and a couple of bill auctions wrapping up the day.
On the Earnings Calendar, we have just over 50 companies reporting earnings today. Scanning through the list, I don’t see any that would be market moving reports. However, it is always wise to make sure are checking your current holdings and those you are considering to trade. It only takes a couple of minutes but could save you thousands in trading capital.
Action Plan
Friday was a tough day for the traders that jumped in on Thursday trying to buy the dip. While the DIA managed to hold on to the 50-Day SMA, the SPY and the QQQ’s both closed below. Technically the QQQ’s are in better shape than the SPY having managed to close just above the low on the 10th. The SPY is now technically in a downtrend and a candidate for a Blue Ice Failure pattern after a brief rally. The IWM is by far the weakest of the indexes closing well below the 200-day average, however, holding onto a major price support built over the last ten months of trading.
I was quite content with my decision to stand aside on Friday. As I will be gone shortly after the open to meet with a group of astronomical scientists to study the eclipse, I will not be trading today either. Although the futures were negative all night long, they are now suggesting a flat open. Personally, I believe that the indexes are currently over sold in the very short-term. A bounce or relief rally could begin at any time, but please don’t interpret that as an invitation to buy the dip blindly. There is a lot of technical damage in the SPY, QQQ, and IWM. Any bounce or rally may serve to attract more Bears so be very careful. Also, keep in mind much of the US will be out observing the eclipse today. I would not be surprised if the volume was light and the price action was choppy most of the day.
Trade Wisely,
Doug
The Bears create technical damage.
Sad
ly the price action concerns that I mentioned yesterday came to fruition as the Bears won the battle at resistance. This time there was significant technical damage was created the in the index charts. It may turn out to be nothing more than another round of market jitters but to ignore it is unwise. The mantra for the last few years has been “Buy the Dip.” However technical damage such as this normally takes at least several weeks to resolve. We can now expect more volatility and challenging price action going forward. Plan accordingly.
On the Calendar
We have a very light Economic Calendar this Friday. At 10:00 AM Eastern we get the latest reading on Consumer Sentiment. Although Consumer Confidence has been running near 20-year highs, Consumer Sentiment has been drifting lower. The consensus is expecting a slight rebound to 94.0 vs. the last reading at 93.4. Shortly after at 10:15 AM we have a Fed Speaker to round out the week.
On the Earnings Calendar we just over ten companies reporting today. One of the biggest today will come from DE that reports before the bell. Retailers EL and FL are also slated to report before the open today. Although earnings season is winding down, it’s very important to make checking earnings report dates on the companies you hold and are thinking of buying. Failing to do so can quickly damage an account.
Action Plan
Raising my caution level based on the price action served me well yesterday as the Bears won the first battle at resistance. Yesterday the DIA broke and closed below the strong uptrend that it has enjoyed for several months. Tremendous technical damage in the SPY was created yesterday breaking down below the prior low and closing well below the 50-day average. The QQQ’s also suffered damage but managed to hold above the last low and the overall up trend closing at the 50-day average. The poor IWM not only made a new low in its current downtrend but also sliced right through the 200-day average as if it was not even there.
With so much technical damage ahead of the weekend I will most likely stand aside today. As you know, I always try to trade with the overall trend. There are now sufficient clues that the up trend may falter, so I will begin putting together a watch-list of down trending stocks. If you happen to be a long only trader, it is now time to curtail your trading activity. Repairing technical damage will normally require several weeks of trading during which time volatility will likely be elevated making it very challenging even for the most experienced traders. Please protect your accounts and realize you don’t have to trade every day to be a profitable trader.
Trade Wisely,
Doug
After 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.
