Price will lead

2017 was an unbelievable year, but 2018 could be even better.  Price will lead the way.  I know there a lot of folks out thinking that because the market has run up so much, it necessarily must pullback.  That is without a doubt a possibility, but it is also far from a sure thing.  Unemployment is at historic lows, and consumer confidence is at historic highs.  Manufacturing is growing, and finally, real wages are beginning to increase.  The analysis suggests earnings growth may be as good or better this year as the last.  Perhaps it would be best not to trade what we think and focus on what we see in the price action.  The institutions always have and will always determine the direction of the market.  If we can set aside our bias, focus on price and simply follow it rather than trying to predict direction: Then 2018 could indeed exceed our expectations.

On the Calendar

One important report and a slew of bond-related auctions and settlements for this first trading day in 2018.  The PMI Manufacturing Index is at 9:45 AM Eastern today.  Last month PMI rose 1.2% on increasing orders and employment, but forecasters see the index standing pat at the same 55.0 reading this month.

There are five unconfirmed potential earnings reports today, but they all come after the bell.  Remember January begins a new round of earnings so make sure to develop the habit of checking coming reports.  The fireworks don’t really begin to ramp up until mid-month, but there is no time like the present to start developing a good habit.

Action Plan

The last trading day of 2017 had a very nice start to the day, but profit takers quickly began to rule the day.  The DIA, SPY, and IWM left behind bearish engulfing patterns while the QQQ’s seemed to give up a short-term support.  Historically January is a positive month as the bulls find value after a tax selling pullback in December.  However, no such pullback occurred this year.  Only a choppy consolidation that essentially held the bullish trend.  So what happens next?  As of right now, I have to recognize the bearish candles left behind on Friday a proceed with caution.  At the same time, I want to be careful not to jump to a bearish conclusion by trying to get short.  Remember last week was low-volume chop which is not exactly a confidence builder for direction.

Futures are currently pointing to a bullish open but don’t be surprised if today is another low-volume showing as many traders may have extended their holiday vacation time.  I plan to move slowly to as far as adding new positions today, but I certainly will rule out the possibility of new trades.  Let’s keep in mind that the FOMC minutes are out tomorrow and the Employment Situation number is Friday morning.  Both tend to inspire choppy indecisive price action.

Trade Wisely,

Doug

Focus on Improvement

It’s customary as the year winds down to reflect on the past year.  While I’m very grateful for the amazing results that 2017 provided, my focus tends to center on the year ahead.  I’m not talking about trying to predict the future as so many traders attempt to do.  No matter how 2017 turned out for our future has yet to be written.  As a result, I tend to focus on improvement as a trader.  As the CEO of my trading business, I must always be on the lookout for ways to improve so my business can grow.  Most people don’t like change but change we must it achieve better results.  Embrace the change and challenge yourself to improve.  Today, right this minute, make the decision to step up.  Be willing to do whatever it takes to exercise your right to succeed.

On the Calendar

The Friday Economic Calendar is devoid of any market moving reports today.  There are two note settlements and an oil rig count report but other than that a quiet day.

On the Earnings Calendar, there are only eight companies expected to report as we wind down the trading year.

Action Plan

After the morning flurry of activity, the market as expected slipped into choppy price action.  It was surprising to see some bulls wake up in the last 30 minutes of trading to close the DIA, SPY, and IWM higher on the day.  The QQQ’s, on the other hand, decided just to rest.  Dow futures are pointing to a bullish open that may come close to making a record high print at the open.

Overall the trends continue to remain bullish with no signs of any meaning selling or market fear.  Nevertheless, I plan to avoid adding risk just ahead of a long holiday weekend.  As a result, my focus is on profit taking and capital protection today.  There are a lot of very good looking charts on my shopping list for next year.  Expect volume to decline a quickly today as many traders will be headed out for New Years celebrations.

2017 has certainly been an exciting record-breaking year filled with amazing profits for which I am very grateful.  I want to wish you all a safe and Happy New Year.

Trade wisely,

Doug

Never Say Never

As this amazing year winds down, it seems more and more logical that light volume chop is likely to continue.  But never say never with the Bulls having such a big target of 25,000 just above.  The odds of that occurring are quickly diminishing, but you never want to rule out the power of a big round number.  Futures are pointing to a bullish open, but volume is anemic and likely to decline quickly after the morning flurry of activity.  If you continue to hold market risk, stay focused on price and guard against complacency.  Although it may appear unlikely, this record-breaking year could still have a trick or two up its sleeve.

On the Calendar

Thursday’s Economic Calendar gets going at 8:30 AM Eastern with International Trade in Goods & Jobless Claims.  The goods deficit is expected to slightly narrow to $67.7 billion in November vs. October’s reading of $68.1.  Jobless Claims forecasters see a decline 240K vs. last week 245k print as demand for labor remains very strong.  At 11:00 AM is the EIA Petroleum Status Report which if not forecast but the trend has been showing a slight drawdown in supplies helping to bolster the energy sector.  After that, there are several reports unlikely to move the market as well as several Bill Announcements.

There are nine companies expected to report today, mostly considered penny stocks and very unlikely to have any market effect.

Action Plan

Although I have been under the weather, I have continued to keep very close tabs on the market.  So far this week light volume and choppy price action have reigned supreme.  The question is will that continue as trading this year rapidly winds down.  Logic would say yes but with Dow 25,000 only 225 points away a bullish push is not out of the question.  After all underestimating the Bulls this year would have been a mistake of a lifetime.  Having said that I think its still very wise to be very cautious in such light volume market conditions.

Rather than adding risk ahead of another long weekend, I will be more focused on building shopping lists for next year, taking profits and protecting capital.

Trade Wisely,

Doug

Getaway Day

Combine Friday and the last trading day before Christmas, and you might hear volume sucked out the market.  Today is the perfect storm for a Getaway Day for the long weekend.  As always there will likely be a flurry of opening activity, but after that, expect very light volume chop.  Monday the market is closed, and I would not be at surprised to light volume next Tuesday as traders extend their vacation.  If your not planning to take the day off then work on your trading plan for next year.  Review your past trades and look for ways to improve.  Clean your watchlists and prepare shopping lists for next year.  It’s also a very good time to study new techniques or strategies to improve as a trader.  I wish you all a Very Merry Christmas!

On the Calendar

The last day of trading before Christmas see an Economic Calendar with several important reports.  At 8:30 AM Eastern is the Durable Good Orders which consensus sees increasing by 2%.  Even after excluding transportation orders are expected to increase by a solid gain of 0.5% with the core number growing by 0.4%.  Also at 8:30 AM is Personal Income and Outlays which income is seen rising 0.4% and consumer spending up 0.5% with the holiday boost.  At 10:00 AM is New Home Sales is expecting a decline from October’s 685K vs. Novembers 650K.  At 10:00 AM is Consumer Sentiment that is expected to remain very strong with a consensus estimate of 97.0.

On the Earnings Calendar, there are only six companies expected to report today now of which are particularly notable.

Action Plan

The Bulls found a little inspiration yesterday gaping up and pushing higher during the day.  Unfortunately, the last hour of the day saw some significant profit taking once again confirming a reason for caution.  Currently, the uptrend is still intact, and the VIX showed no rising fear.  Futures are currently positive removing the possibility of a government shutdown by passing a CR  that’s good through January 19, 2018.

After the morning rush, I expect today’s volume to drop faster than the Times Square New Years Eve ball.  Although I will be at my desk, I will not be doing any trading other than maybe taking some profits.

Trade Wisely,

Doug

Short Santa!

Yesterday’s price action left some reason for cautiousness.  Three of the four major indexes left behind bearish candle patterns.  How dare they Short Santa!  The truth is love shorting because of the very quick money made during a panic move.  However, for retail traders, we have to be very careful about predicting market tops and jumping to early.  Been there, done that and have a lot of battle scars to remind me of the big losses that can occur when trying to predict.  Unless you are willing to endure nasty whipsaws and being run over in a short squeeze, don’t short a trending market!  If you think the market is failing then stand aside and wait for it to prove.  It’s the big boys that will decide a top, not retail traders.  Once they make that decision, it will be very obvious, and we will have plenty of time to participate.  Try to predict and get eaten by the sharks.

On the Calendar

The hump day Economic Calendar gets doesn’t get going until 10:00 AM Eastern with Existing Home Sales.  Existing sales increased in October 2.1 percent to a 4.870 million rate.  Forecasters are expecting, even more, strength. December consensus expects a 5.550 million reading.  At 10:30 AM we get the EIA Petroleum Status Report which is not forecast but has shown a trend of rising supplies and concerns about overall demand.

On the Earnings Calendar, we have 20 companies expected to report today.  Notable before the bell is GIS and WGO but after the bell keep an eye on BBBY.  Don’t get caught by an earnings event.  Always check reports against your portfolio!

Action Plan

After a gap up open, the bulls decided to take a siesta and allow the bears to have a little snack.  The DIA, SPY, and IWM left behind bearish engulfing candles, and the QQQ joined in to slide south as well.  Although caution is warranted, the futures have been signaling all night that a follow through move down will be challenged by the bulls.  Perhaps it’s due to the Tax Reform bill passing the Senate or the good earnings reports from FDX and MU.  However at this point but the bulls don’t seem ready to give up just yet.

If the futures continue to show strength into the open those who got short early could get trampled under by stampeding bulls.  I’m not sure there is enough short interest to trigger a full on short squeeze, but you never know.  Equally possible is that the gap up open could be meet with some very hungry bears.  Stay on toes and focus on price action clues.  Remember Congress will have to act quickly on a budget to prevent the government from running out of money midnight Saturday.  The spin doctoring in the new could easily toss the market around so don’t dip into that eggnog just yet.  It’s also important to note that with the holiday weekend fast approaching volumes could quickly decline so plan accordingly.

Trade Wisely,

Doug

Dow 25,000?

The bulls appear to have limitless energy to drive the market higher.  Is Dow 25,000 in the cards?  With Congress likely passing the Tax Reform bill today and the VIX indicating No Fear it certainly seems possible.  Exciting, yes, but let’s not get too overconfident or complacent.  Let’s remember we are still facing a government closure this weekend unless Congress can get their act together and pass a budget.  A failure to do so would likely send shock waves through the market so stay focused on price and have a plan if the tide starts to go out.  It would also be wise as you plan the rest of the week that volumes may quickly begin to decline as traders take off for Christmas.  A trade may look perfect, but without volume, it can’t move and do you want to be holding a lot of open positions over the holiday.  Something to ponder as you look ahead and assess the risk.

On the Calendar

Tuesdays Economic Calendar kicks off at 8:30 AM Eastern with the Housing Starts Report.  October saw a sharp acceleration with starts up 13.7% with permits up 7.4%.  Forecasters expect November to moderate with starts coming in at 1.240 million annualized vs. 1.290.  Permits pullback slightly to 1.270 million annualized vs. 1.316 in October.  After that, we have a couple of reports unlikely to move the market, a bond auction, and a Fed speaker at 1:10 PM.

On the Earnings Calendar, we have just over 30 companies reporting today.  After the bell, a couple of earnings report to take note of is RHT and MU.  Continue to reinforce the good habit of checking earnings dates on the stocks you own or are thinking about buying.

Action Plan

New closing record highs across the board on the major indexes yesterday.  If I heard it correctly, the Dow has amassed 85 new records so far this year.  What an amazing year!  While the markets continue marching higher, the VIX is once again testing historical lows.  Fear of a market correction at least for now is not at all on the mind of traders and investors.  The Tax Reform bill is likely to pass today, and then Congress has to deal with the pending government closure coming this weekend.  We could see some volatility due to the D.C. news cycle as a result so stay on your toes.  Complacency is dangerous!

As of now, the futures are pointing to a small gap up open.  At the open, the Dow will likely be less than 150 points from a 25000 print.  Can the bulls get it done this week?  We have some bigger earnings reports after the bell today that could certainly help if they report well.  As for me I will continue to trade long positions with the overall trend and will continue to look for new trading opportunities.  However, I will also need to keep in mind that volumes could quickly begin to diminish as Christmas draws near.   Plan accordingly.

Trade Wisely,

Doug

Christmas Gift

With the promise of Tax Reform passing Congress today the futures are wildly bullish.  The President, of course, will quickly sign the new bill into law bringing a huge Christmas Gift to the market.  After the morning gap up the Dow will be in striking distance of a 25,000 print.  I would be surprised it the 25K hats, and t-shirts are ready printed and just waiting under the trading desks.  Earnings this week from, FedEx, Micron, RedHat, General Mills, Carmax, ConAgra, Nike, and Cintas could be just enough rocket fuel to propel the market higher.  Anyone caught short will experience significant pain this morning and will likely get squeezed out this morning.  Expect higher volatility and prepare for quick price action.

On the Calendar

Monday’s Economic Calendar is a light one with only the Housing Market Index report at 10:00 AM Eastern.  Home builders have been reporting gains in confidence as new home sales have been rising in recent months.  Forecaster sees the December index holding at steady matching the 70 reading in November.  After that, all we have is a bill announcement and a couple of bill auctions.

On the Earnings Calendar, we only have 11 companies stepping up to report results today.  Most notable today are CCRC and LEN which both report before the bell.

Action Plan

Friday’s market highlight reel would have to focus on the sudden strong move in the tech sector.  The QQQ’s reached out to a new record high close and regained market leadership.  The SPY and the IWM both had good days but ran into some profit-taking the last hour of trading ahead of the weekend.  Trends continue up, and the Bulls remain solidly in control.

With a weekend of wrangling, it seems Congress is finally ready to vote on the Tax Reform bill.  According to reports they now have the votes so they can comfortably pass the bill.  As a result, Futures are flying high with the Dow futures pointing to more than a 100 point gap up at the open.  Big gap up opens at market highs are dangerous to chase due to the possibility of a so-called blow-off top.  They are also often subject to violent whipsaws so don’t get caught up in the drama and chase.  At the open, the Dow will only be about 200 points from a 25,000 handle.  With some big earnings coming out this week, I there is a very real possibility the energy will be there to drive it up to that level before the end of the week.  I also think we could see an extra dose of volatility so plan carefully.

Trade Wisely,

Doug

News of a Vote

Yesterday we saw some selling on worries the Tax Reform bill would not get finished up.  This morning sentiment quickly changes as news of a vote and passage could happen as early as today.  I hate politically driven markets because as retail traders our edge simply disappears into the spinning black hole of the news cycle.  Futures are not pointing to a significant gap up that will put a lot of pressure on those that got short early.  Let’s keep in mind that a Dow 25,000 print is not that far away so don’t expect the bulls to give up easily.  Perhaps the passage of tax reform is all the fodder needed to encourage the bulls to push higher.  I think the road ahead could be a bit bumpier than we have seen this week.  Plan carefully and remember to take profits.

On The Calendar

We kick off this Quadruple Witching Friday Economic Calendar with the Empire State Mfg. Survey at 8:30 AM Eastern.  The survey has been running very hot all year which some have warned is at unsustainable levels.  Consensus sees a December decline to 18.0 vs. Novembers 19.4 reading.  At 9:15 AM is Industrial Production which forecasters see gaining 0.3% in November.  We have a couple of mid-day reports that are unlikely to move the market and then Treasury Internation Capital at 4:00 PM that has no forecast.

On the Earnings Calendar, we only have 12 companies reporting none of which are particularly notable.  However, have a plan if you happen to own one of these companies.

Action Plan

The market found some sellers yesterday across all 4-major indexes due to the uncertainty surrounding the Tax Reform bill vote.  Both the DIA and the SPY left behind bearish engulfing patterns, and I suspect many began to predict a market top placing short positions.  During the evening we heard that the conference revised Tax Reform bill will likely get a vote as early today.  Plenty of time for the President to sign off on before year-end assuming it passes.  Consequently, the futures are responding with bullish glee and early short traders are likely to feel some pain.

Up to this point, this last rally has seen very little volatility, but I would not be surprised to see that change very soon.  As we head into the weekend, I normally am more of a profit taker than one looking for additional risk.  That’s not likely to change today but never say never.  Price is King, and I will follow price action that sets up a good opportunity for profit.

Trade Wisely,

Doug

Big News Day

I have to admit that I was somewhat surprised that yesterdays FOMC announcement turned out to be such a non-event.  The market just yawned and saw nothing to react too.  Today is another big news day with some big after the bell earnings reports tossed in for good measure.  The Bulls are firmly in control buy at the end of the day yesterday price action suggested a little weariness and maybe a rest in the rally is possible.  With all the news the market will have a lot to chew on and potentially react so stay on your toes.  In an all bull market it’s very easy to become complacent because you can buy almost anything at anytime and the rising tide makes you money.  Guard yourself against complacency by staying focused on the only thing that really matters, Price!  The clues will be there if you watch and listen to the market.

On the Calendar

We kick off the Thursday Calendar with the weekly Jobless Claims at 8:30 AM Eastern.  The after-effects of Hurricane Maria are expected to continue to impact initial claims with a rise to 239k vs. 236k.   Also at 8:30 AM  is the Retail Sales numbers which are expected to see the core rate rise by a solid 0.4%.  To finish the 8:30 AM data dump is Import and Export Prices where forecasters see imports rising 0.7% with exports only increasing 0.3%.  At 9:45 we get the PMI Composite a reading above 50 indicates manufacturing growth while a sub-50 print points to a decline.  Business Inventories comes out at 10:00 AM and forecasters see a 0.1% draw-down in inventories which is considered bullish.  After that, we have a few non-market-moving reports and bound announcements.

The Earnings calendar show just over 30 companies reporting today.  There are several big noteworthy reports after the bell such as ADBE, COST, ORCL & JBL.

Action Plan

The strength and longevity of this current rally is a bit spooky but also very impressive.  Spooky because the DIA has managed to leave behind gaps 5-days in a row, and impressive in breadth.  Once again new records were set in the DIA and the SPY.  A 25,000 Dow print is now only 325 points away, and the bulls seem very determined to get it there.  However, with the late afternoon selling yesterday across all indexes perhaps a little rest in this bull march is possible.   There is a big economic data dump today as well as several big earnings reports after the bell so the market will have a lot reaction worthy events today.

Currently, futures are once again suggesting a gap up in the Dow, and the VIX continues to register little to no fear.  There is no denying that the trend is up and the bulls are in control.  As a result, I will stay long and continue to look for long trades as long as that condition exists.  Long ago I learned the hard way that trading my bias, predicting market turns and fighting the market was a losing business model!  However, that does not mean we should be complacent and toss caution to the wind.  Stay focused on price, listen to the market and be flexible enough to adapt if a change appears.

Trade Wisely,

Doug