Should I stay or should I go?
An old song lyric seems to describe my thoughts this morning. “Should I stay or should I go,” by The Clash. As most of you know, I consider Friday to be Profit Day as we head into the uncertainty of a weekend. Even though we saw a tiny bit of profit taking yesterday in the overall market, our current trades mostly managed to move up. Yes, the weekend is uncertain, but as of now, the overall market is still very strong with the future pointing to a higher open. So what’s a guy to do? Focus on price action and let it lead the way! If I see the bears stepping in, I may begin to trim risk and put some gains in the bank. If the bulls remain strong, I may lean toward letting them ride because of the comfortable gains we currently hold. Of course if your nervous or would sleep better by reducing some risk than by all means do so! You can’t go broke taking a profit, and you can always reenter on Monday. What ever you decide focus on price and remember Price is King!
On the Calendar
There’s no rest for the weary on this Friday’s Economic Calendar having the most important reports of the week. It all begins before the market opens at 8:30 AM Eastern with the Consumer Price Index followed directly by Retail Sales numbers. Forecasters see a 0.2% in the core number and 0.6% increase in energy. The year-on-year number is expected to rise, to 2.3%. Hurricane replacement sales and higher gasoline prices are expected to bloat the Retail Sales number today. Consensus see’s a rare 1.8% as a result. Of lesser importance, Business Inventories and Consumer Sentiment are both at 10:00 AM followed by the Treasury Budget at 2:00 PM. We have 3 Fed Speakers today, and Janet Yellen speaks on Sunday.
On the Earnings Calendar, we have 20 companies expected to report today. Especially notable will be BAC and WFC which both report before the bell. PNC and JBHT also report before the market opens today.
Action Plan
Yesterday proved to be another record high intraday on the DIA, SPY, and QQQ’s but it was unable to hold on to that level into the close. Although some selling occurred, it was very light and choppy. As I write this, the Futures are pointing to a slightly higher open. BAC has already reported beating estimates by 3 cents a share.
Because it Friday I will be focused on profits but because I’m pretty comfortable with the current positions a hold over the weekend is possible. Of course, price action, as always will be the key decision maker.
Trade Wisely,
Doug
The 48th Dow record this year.
In my 27 plus years as a trader, I have witnessed many extraordinary market events. However, I have to say that this year is one of the most amazing. According to the news, President Trump is the most hated president in history yet since his election the market continues to leap higher with confidence. Yesterday marked the 48th Dow record this year, and the other indexes have followed setting record after record.
As earnings season begins, it now falls to the companies to prove their results can support these high prices. Personally, I think they will. Market analysts expect to see 11% growth in company revenues this year. What’s really surprising is they expect another 11% growth next year as well. If that actually comes to pass, then this trend could easily keep going up for the foreseeable future. As I said before, Amazing!
On the Calendar
We kick off the Thursday Economic Calendar at 8:30 AM Eastern with the weekly Jobless Claims followed directly by the PPI-FD report. Consensus has Jobless claims easing slightly from 260k to 252k this week, but impacts from Puerto Rico are still a wild card. The Sept. PPI consensus expects a gain of 0.4% overall reading. At 11:00 AM we get the latest reading from the EIA Petroleum Status Report. Most are continuing to expect rising demands to diminish supplies. We have 3 Fed Speakers and several non-market moving reports today with the Treasury Budget at 2:00 PM to round out the day.
The 4th Quarter Earnings Season officially kicks off today with reports from C and JPM before the market opens. Earnings reports will ramp up sharply next week so make sure your checking before placing new trades.
Action Plan
The DIA, SPY, and QQQ’s all closed at new record highs yesterday despite very slow and choppy price action. The market had little to no reaction to the FOMC minutes yesterday which was quite odd. That would suggest all the pressure now falls to the big bank reports today and tomorrow. In a rising rate environment, one would expect the banks to report well, but as you know, anything is possible.
Futures are currently suggesting a flat to slightly lower open as I write this but as the earnings reports come out that could certainly change quickly. As we head into the weekend, I am thinking some profits into the market strength. I will also look for new long trade entries to take advantage of the uptrend. As always I will avoid chasing and favor stocks that are at or near price support levels.
Trade Wisely,
Doug
The Calm Before the Storm
Although bullish, so far this week the price action has been choppy. Many individual stocks performed well, but overall the market was simply marking time as it waits for the FOMC minutes and the kick off to earnings season. Think of this as the calm before the storm. As the drama earnings season unfolds, we can expect to see greater premarket futures activity around the reports as the market first speculates and then reacts to the new data. New and inexperienced traders often find earnings to be very challenging due to the big price swings they can create.
My suggestion is to focus on the price action, support levels, resistance levels and trend of the overall market. Currently, the trend is up. Stay the course and trade with the trend but avoid speculating on the individual stock earnings reports. Also, I suggest turning off CNBC and all the emotion they stir up around events. Drama is great for their ratings but not so much for your trading accounts.
On the Calendar
The Economic Calendar today is dominated by Fed. We have a Fed Speaker at 7:17 AM and another at 2:40 PM. However, it’s the FOMC Minutes releasing at 2:00 PM that will garner the most focus. The market will be looking for clues not only to future interest rate increases but also details of their balance sheet unwinding plans. At 10:00 AM is the JOLTS report which tracks monthly changes in job openings. The consensus is expecting this number to remain very strong at 6.160 million.
I’m showing just over 20 events on the Earnings Calendar today. Before the market open we will hear from BLK, DAL, and FAST. Keep in mind this is the calm before the storm on the earnings front. Thursday we will hear from C & JPM with BAC and WFC on deck for Friday to kick off earnings season. Make sure you are doing your due diligence on every trade because, and earnings surprise can be very costly!
Action Plan
Yesterday the morning pop was once again met with whipsaw in price action then followed by lots of chop the rest of the day. The managed to close at yet another record high while the SPY, QQQ, and IWM chose to rest in a consolidating range. Futures are currently pointing to flat to slightly lower open, but that could change because I’m writing this 3 hours before the open.
Don’t be surprised to see very light volumes and choppy price action until the release of the FOMC minutes at 2:00 PM. Directly after the release, we could see some fast intraday price swings in reaction. After that drama subsides, the market focus will turn directly to the big bank earnings which will begin before the market opens on Thursday. As you know, earnings reports are unpredictable, and the big bank reports are normally market moving events so plan your trading accordingly.
Trade Wisely,
Doug
The Bulls take a healthy rest.
The Bulls take a healthy rest.
After a strong and extended upward run the Bulls take a healthy rest. As much as we all like to see the market power higher a nice rest to develop a new level of price support is productive. If the Bulls maintain control while building support, more buyers will be attracted, and confidence in the trend will expand. Having taken profits into the rally, we are in very comfortable position without all the pressure. Our profits are safe while those that allow greed to control their trading likely saw their gains diminish yesterday. We are now free to find new low-risk entries.
On the Calendar
Another light day on Economic Calendar with the NFIB Small Business Index at 6:00 AM Eastern. There is a Fed Speaker at 10:00 AM and one at 8:00 PM today as well as several bond auctions to round out the day.
On the Earnings Calendar, there are a few companies reporting, but I don’t see any market movers. Keep in mind that Earnings Season will officially kick off on Thursday with reports from C and JPM. Make sure to check all position you hold and those you are considering buying for earnings dates. Fail to do so, and the consequences can be significant.
Action Plan
Yesterday the market took a well-deserved rest pulling back slightly with choppy price action. With the banks back open today we should see some better price action, but don’t be surprised if it remains choppy as we wait for the Fed Minutes. Another reason the market could continue to pause is the kick off to Earnings Season beginning on Thursday. Will the Bulls or the Bears be inspired as results roll out?
The overall up-trend continues strong, so I will continue looking for long positions. Futures are once again pushing higher with the Dow suggesting it will open at or near record highs. I would be cautious of chasing the opening pop as it could produce another whipsaw much like what happened yesterday. I will give it a good 15 to 30 minutes to see if real buyers step in after the professional pump.
Trade Wisely,
Doug
Bulls continue to show strength.
Bulls continue to show strength.
After such an impressive run higher, the Bulls continue to show strength this morning. The Dow futures are pointing to a new record high, and the VIX hovers near historic lows. Is there really no fear in the market or are we looking at mass complacency? Your guess is as good as mine. It is logical to think a pullback could begin at any time after such a strong bullish move. However, it’s a mistake to try an predict a top.
As I was coming up as a trader, this is a mistake that I would repeat over and over. I would predict that the market was up so much it absolutely had to come back down. Sadly that proved to be a very costly mistake for me. At times I would stand aside anticipating a pullback only the watch the market continues moving higher and leaving behind. I would often miss out on the biggest bull run of the year. Even worse I would at times get short thinking the Bears had to take over soon only to be run over by the bulls.
When we look at the charts, it’s logical to think a pullback is likely and we should prepare. However, if we put our bias aside, we see a chart showing no evidence of a pullback as of now. I am not suggesting we should throw caution to the wind and buy with both hands if fact I have been taking profits into the strength. I am only trying to suggest that you see the chart as it is not as you believe it should be! Emotion can easily trump logic making a run last much longer than anyone expects.
On the Calendar
About all that’s on the Economic Calendar is that today is Columbus Day. As a result, banks and bond markets closed in observance of the national holiday.
On the Earnings Calendar, there are 14 companies reporting today, but I don’t see anything particularly noteworthy or market moving.
Action Plan
The DIA, SPY, IWM, and QQQ’s decided to a little rest on Friday morning, but the Bulls had another plan’s for the afternoon lifting them off the intraday lows. The QQQ’s managed a new record high close by the end of trading on Friday following through after it’s impressive breakout Thursday. As of now, the futures are suggesting a bullish open today with the Dow possibly opening today’s trading at yet another record high. Friday saw the VIX rise slightly after having reached a new closing low Thursday.
With the banks closed today it’s possible we could see a choppy light day after the morning rush. There are a lot of good-looking charts to choose from but make sure that you’re not chasing. I want to continue to trade long with this very bullish trend however we should not be surprised to see profit taking begin at any time. Plan accordingly.
Trade Wisely,
Doug
Can this Bull Run continue?
As this week trading week comes to a close, the majority of traders have just one question on their mind. Can this Bull Run continue? Common sense would tell us the odds of a pullback after seven straight days of new records is pretty high. However, the strength of the run ahead of earnings season already defies logic. I say that only to remind you that predicting what a market may or may not do is an exercise in futility. Anything is possible! The best we can do as traders is have a plan with a set of rules to manage our emotions. As a result of my rules made it necessary for me to lighten up my risk to the market by taking some profits. Logic says a pullback is likely, but the price action has no hint of a pullback as of now. If there are more buyer than sellers, then the market could still move higher! What matters is that you are managing you and remembering that this is a business.
On the Calendar
On the Economic Calendar today we have the Mr. Big report at 8:30 AM with the Employment Situation. As this report will incorporate the effect of the hurricanes, the consensus estimates are all over the place. Essentially the best they can do is guess. For example, the nonfarm payroll expects 100K, but the consensus ranges between Zero and 140K. There are two reports unlikely to move the market, Wholesale trade at 10:00 AM and Consumer Credit at 3:00 PM. There are 5 Fed Speakers on the calendar today.
On the Earnings Calendar, there are only eight companies reporting today. I do not see any earnings reports that are particularly notable.
Action Plan
After the news reported a successful vote in Congress allowing the Tax Plan Process to move forward, the Bulls came out in force to express their support. As I mentioned above, I reduced some of my risk to the market closing part or all of a few positions to capture gains ahead of the weekend. The VIX made a new closing low yesterday below a 9-handle. Truly amazing! I think it would be wise to guard yourself against complacency.
Once again I will be more focused on taking profits today, but I will not rule out the possibility of new trades.
Trade Wisely,
Doug
Unable to find profit takers.
Although the market appears to be quite extended, its unable to find profit takers just yet. The VIX continues to dance near historic lows but as of yet unable to make a run for a new low print. Perhaps the market is waiting on all the Fed speak today or more likely focused on the Employment Situation number that comes out Friday morning. None the less I will continue to be very focused on price action and prepared to take profits ahead of the weekend if weakness shows itself. With an extended market and the weekend near, I will need to uncover a nearly perfect trade setup for me to buy additional risk.
On the Calendar
The Economic Calendar events of interest begin at 8:30 AM Eastern. International Trade forecasters are calling for a narrowing of the trade gap this month due to the hurricane effect. August is expected to come in at $42.5 vs. July’s 43.7 reading. A narrowing trade gap should be of benefit to the 3rd quarter GDP. Also at 8:30 AM is the weekly joblesss claims and is expected to come in with a reading of 265K vs. 272k last week. There are 4 Fed Speakers on the calendar today with three of them speaking in rapid succession beginning at 9:15 AM. At 10:00 is Factory Orders which is expected to rise 1% in August vs. the 3.3% decline in July.
On the Earnings Calendar, there are only 14 companies set to report. Of note are reports STZ before the open and COST after the close today.
Action Plan
The incredible strength of the Bulls kept profit taking in check even though it’s quite extended. The promise of a tax plan continues to inspire investment no matter the price or valuation. Also, keep in mind that earnings season will begin soon and there seems to be tremendous optimism of strong reports.
With the market continuing to show enough strength to hold up I maintained all the current positions. As a result, I again will focus on price action and prepare to take some profits before the weekend if necessary. As we wait for the big employment number Friday, it would not be a surprise to see choppy light volume action again today.
Trade Wisely,
Doug
Bullish But Stretched
Bullish But Stretched
There is no doubt that the Bulls are firmly in control as this rally continues to set new records daily. Both the DIA and the SPY showing impressive strength while the rally in the IWM has been nothing short of incredible. I think even the most enthusiastic traders would have to admit at this point the market is Bullish but Stretched. Could we continue going higher? Yes, we absolutely could, but the likelihood of a profit-taking pullback is growing. It’s my opinion that trying to enter this run now is like a dog chasing a loaded truck and at high risk of being run over.
On the Calendar
Before the market open, we have the ADP Employment report on the Economic Calendar at 8:15 AM Eastern. The ADP has been missing the actual number for months, and I think has begun to lose credibility with traders. The August ADP was 237K while the actual came in at 165K. Obviously a huge swing and miss. The September ADP is looking for 140K.
At 9:45 AM we get a reading form PMI Services, but the more important number is the ISM Non-MFG Index at 10:00. The ISM forecasters are calling for the September number to come in at 55.5 vs. the August 55.3. At 10:30 AM is the very important EIA Petroleum Status Report. The current rally in oil stocks would suggest the market is expecting further declines in supplies. We have a Fed speaker at 3:00 PM and then the Fed Chair speaks at 3:15 today.
Action Plan
Currently, the futures are suggesting a flat to slightly lower open this morning which should not be a big surprise after such a strong run. I believe the market could begin to show some stress and as a result, profit-taking could begin at any moment. Please understand I am in no way shape or form suggesting bearishness because there is no evidence of that in the charts. The VIX moved slightly higher yesterday even as the overall market us rallying. That’s odd but could be a small clue to the stress I mentioned above.
My focus as always will be on the price action, and I will be much more inclined to take profits today rather than entering new positions. I love selling into strength! Like the song says, know when to hold em, know when to fold em, know when to walk away and know when to run. I think is time to consider putting some money in the bank and walk away from the table for just a little while.
Trade Wisely,
Doug
The Bulls continue their march higher.
After seeing the terrible news out of Las Vegas, I was half expecting to see the market lower this morning. Looking at the futures clearly, that is not the case as the Bulls continue their march higher. Lately, I have heard from a lot of traders trying to predict a market selloff. While their argument is rational and compelling, they are missing out on a very key element. Emotion! Let’s face it the market is emotional and thus does not have to abide by the rules of rationality. If the market was rational how could you explain the late 90’s bull run? As retail traders, it’s very important that we simply continue to trade the trend that is before us and avoid the urge to predict. Now that does not mean we throw caution to the wind and go all in! We must always be prepared and focused on price action. When the trend is over price will tell us, and we need to have a plan ready to go to avoid emotional decision-making.
On the Calendar
The Economic Calendar begins the 4th quarter with the PMI Mfg. Index at 9:45 AM Eastern time. Forecasters see no change from September’s 53.0 print. At 10:00 AM we get the most important number of the day in the ISM Mfg. Index report. The consensus for September’s headline is 58.0 vs. August’s 58.8. Also at 10:00 AM today is Construction Spending where the consensus call for August is a 0.3 percent rise. We have a Fed Speaker at 2:00 PM and few bond related items to round out the day.
On the Earnings Calendar, we have under 20 companies reporting, and I would not expect any of them to be market moving. With the 4th quarter earnings season just around the corner, I would be wise to make them part of your planning going forward.
Action Plan
The futures are pointing higher with the DIA, SPY, and IWM likely to make new record high prints at the open. The QQQ is lagging behind and still under price resistance but also gapping higher at the open. Always keep in mind that gaps at the market open can produce whipsaw price action so avoid chasing in at the open.
Because I don’t want to chase, I will be looking for new long trades setting up at or near price support levels.
Trade Wisely,
Doug
Bullish but slightly apprehensive.
Bullish but slightly apprehensive seems to be a good description of the overall market condition this morning. As the war of words continues to intensify between the US and North Korea, it’s like a nagging headache the market would like to ignore. However, we should prepare for sudden spikes of volatility and the possibility of violent price action if another missile launch occurs. There are a lot of great looking charts and bullish patterns, but I will only consider defensible low-risk positions right now. I also want to guard myself against becoming overly long with such looming uncertainty.
On the Calendar
The last week of September begins with a light day on the Economic Calendar. At 8:30 AM Eastern we have the Chicago Fed National Activity Index and then at 10:30 AM the Dallas Fed Mfg. Survey. Both are reports of lesser importance and are unlikely to move the market. We have three Fed Speakers today, one before the market open, one at mid-day and one what speaks after the close. A few bond auctions round out the economic calendar day.
The Earnings Calendar shows about 25 companies expected to report quarterly results today. Looking through the list, I don’t see any market movers, but RHT is one that I have seen mentioned in the several times in the trading room. If you’re holding RHT make sure you have a plan when it reports after the close today. We are only about three weeks away from the beginning of 4th quarter earnings. It would be wise to begin considering when companies report as you place new trades.
Action Plan
The uncertainty surrounding the weekend and North Korea only had a modest effect on the market last Friday. If fact IWM finally managed a breakout and a new closing record high. The DIA left behind and indecisive candle while the SPY managed to rally off of the morning lows. The QQQ at one point in the day slipped below the 50-day moving average, but the Bulls went to work bouncing off the average. Fear of a market sell-off seems out of the question with ViX very close to record lows or is this extreme complacency? You decide.
We took some nice profits on Friday to reduce risk to the market so as long as the market remains in it’s up-trend, I will be looking for new portfolio additions. The Dow futures are pointing to a slightly lower open today, so there is no need to rush. One chart of particular interest is AABA closing Friday with a great morning star pattern right off of support and trend. Keep an eye on it for any follow through higher as a potential entry.
Trade Wisely,
Doug
An old song lyric seems to describe my thoughts this morning. “Should I stay or should I go,” by The Clash. As most of you know, I consider Friday to be Profit Day as we head into the uncertainty of a weekend. Even though we saw a tiny bit of profit taking yesterday in the overall market, our current trades mostly managed to move up. Yes, the weekend is uncertain, but as of now, the overall market is still very strong with the future pointing to a higher open. So what’s a guy to do? Focus on price action and let it lead the way! If I see the bears stepping in, I may begin to trim risk and put some gains in the bank. If the bulls remain strong, I may lean toward letting them ride because of the comfortable gains we currently hold. Of course if your nervous or would sleep better by reducing some risk than by all means do so! You can’t go broke taking a profit, and you can always reenter on Monday. What ever you decide focus on price and remember Price is King!
