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

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