A weekend of uncertainty ahead.

As the market rallied at the end of the day yesterday, the temptation to add some positions was strong.  After all, there are so many good looking charts showing up, right!  But then I began to think about the weekend of uncertainty ahead and resisted the temptation.  Looking at the futures this morning pointing to sizeable gap down this morning the late day rally is looking more like a Bull trap.  After thinking it through, I am happy to have my account hedged with some DIA puts.  RWO members are holding some nice gains as the weekend approaches it would be wise to think about profits rather than adding new risk.  With all the uncertainty surrounding the market, we can rest well knowing the market will open again on Monday with loads of profit potential.

On the Calendar

The Friday Economic Calendar is giving us break with no market moving reports expected.  Before the market opens at 8:45 AM Eastern we have a Fed Speaker pontificating on interest rates.   At 10:00 AM there is a report from Wholesale Trade which forecasters see a rise in inventories.  We have the Oil Rig Count at 1:00 PM and Consumer Credit at 3:00 PM.  Unless there is some major surprise, none of the reports today are likely to move the market.

The Earnings Calendar is also very light today with only 15 companies expected to report this Friday.  A quick look through them I don’t see anything that would be market moving.  That, however, does not excuse you from checking them against your current holdings.  Relying on luck isn’t a wise way to manage your trading business.

Action Plan

The choppiness of the last couple days has been frustrating.  The Bulls and Bears have pretty much battled to a stalemate.  At the end of the day yesterday it looked like the Bulls were gaining an edge and I found myself wanting to predict the market was ready to move higher.  After all, there are a lot of very good looking charts in my qualified lists.  Finally, experience kicked in, and I started to consider the weekend ahead and all of the uncertainty facing the market.

As of now, the projections on Hurricane Irma could not be worse as this massive storm has the entire state of Florida targeted.  It’s hard to imagine, but if current projections are correct, Irma will affect the entire peninsula coast to coast.  The potential damage and economic disruption are truly staggering.  Then we have that pie-faced dictator with a bad haircut who loves spreading hate and discontent.  So as much as I would like to start buying up stocks my common sense is telling me to wait.  The market will be here Monday, and there is no need for me to be the first sheep through the gate.  If the Bulls do step in, there will more than enough opportunity to profit.

Trade Wisely,

Doug

Piles of uncertainty surround the market.

Even as the morning futures pump up team continues to try and inspire buyers to jump in piles of uncertainty surround the market.  From budget wrangling in D.C., Hurricane threats and a nut job with his finger on a nuclear button the market has a full plate.  I think we can expect some very fast moves in the market as these events unfold in our 24-hour news cycle.  Even a slight improvement in the track of Irma could inspire the Bulls just back in but if projects remain the same the opposite could be true.  The Governor of Florida as order evacuations due to this historic storm.  If I were governor of the market, I would order a temporary evacuation of the market for all inexperienced traders.  Please protect yourself until at least some of the uncertainty passes.

On the Calendar

Thursday’s Economic Calendar begins with the weekly Jobless Claims at 8:30 AM Eastern.  The expectation for this week is only slightly higher at 241K vs. 236K.  However, as the effects of Hurricane Harvey tally up this number could start moving up quickly.  Productivity and Costs also report at 8:30 AM which sees productivity rising 1.3% and labor costs edging higher by 0.3%.  At 11:00 AM we get the EIA Petroleum Status Report.  I would expect to show a decline in supplies even though it is unlikely to include the full effects of Harvey will likely not show up just yet.  We have a three Fed Speakers today, a few on-market moving reports and slew of bond announcements rounding out the calendar day.

On the Earnings Calendar 60 companies are expected to report today so stay on your toes and continue your due diligence.

Action Plan

Although we managed to bounce small bounce in the morning, the market remained mostly stuck in a very narrow range chop.  During the evening the futures were mostly lower, but the market pump up team has been hard at work.  Currently, the futures are pointing to a flat open, but that may be difficult to matain with the market facing so much uncertainty.

The DIA, SPY and the QQQ’s all remain above their 50-day averages, but price action is not exactly inspiring confidence.  I would rank the QQQ’s a the strongest of the indexes and IWM as the weakest which is once again below the 5- day average.  As more and more reports come in on Hurricane Irma, the chances that Florida will take a direct hit seem to grow.  Following this historic storm is another Hurricane named Jose that is growing in strength.  Add in the budget games playing out in D.C. and the growing tensions with North Korea, and it’s understandable that the market nerves are wearing thin.  Expect volatility with fast moves possible as news of these events unfold.  I recommend extreme caution and would suggest new or inexperienced trader simply wait for a bit more stability.

Trade Wisely,

Doug

The Bears delivered technical damage.

Although the bears delivered technical damage to the index charts overall supports held as did overall trends.  Ugly, yes but not a game changer as of now.  The emotional and psychological damage may turn out to be the most important damage created yesterday.  After getting their hands slapped several times trying to reach out for new highs, the Bulls may be a little hesitant to try it again without a little rest.  On the other side, the Bears may have become a bit more emboldened seeing an opportunity to test lower levels.  With all the uncertainty surrounding Noth Korea and Hurricane Irma swirling off the coast of Florida I think should plan for an extra dose of volatility.

On the Calendar

We get going this Wednesday on the Economic Calendar with International Trade at 8:30 AM Eastern.  Forecasters see this most important number of the day widening the trade gap to $44.6 billion vs. $43.6 on the last reading.   At 9:45 AM PMI Services which is the least important number of the day, but forecasters expect it to hold at a strong 56.9 level.  At 10:00 AM we get a reading on ISM Non-Mfg Index.  ISM issued a surprise drop in the index as growth in new orders declined.  However, forecasters expect a bounce back this month to 55.8 vs. 53.9.  The Federal Beige Book rounds out the calendar at 2:00 PM.  It is very unlikely for this report to move the market as a general rule.

It is still important to stay on top of your portfolio management with about 50 companies expected to report earnings today.  Don’t rely on luck, be prepared with a  plan.

Action Plan

Yesterday the uncertainty of North Korea was ramped up as the path of hurricane Irma now has the Florida coast in its path.  Irma has become one the strongest storms ever recorded in at see with sustained winds of 180 MHP.  Currently, it’s Category 5 storm with current projections that it still be a Cat. 4 by the time it makes landfall this weekend.  Of course, it could change course, but as of now, the uncertainty is not helping the market at all!

As bad as yesterdays move was an objective look at the index charts show that the DIA, QQQ, and the SPY remain above the 50-SMA.  They are also still in an overall uptrend, so I see yesterday as a warning shot across the bow but not a game changer just yet.  Having said that yesterday left behind some technical damage that may take some time to repair.  The big bearish candle left behind suggests will likely see a lower low in the near future.  Because of the very short term oversold look of yesterdays move a bounce, or at a minimum, resting seems possible this morning.   The VIX experienced a big spike up yesterday so we can expect some additional volatility.  I suggest it would be wise to exercise additional caution.  New or inexperienced traders should stand aside or perhaps practice in a paper account rather than engage in this battle.

Trade Wisely,

Doug

Uncertainty and Volatility

We have an up trending market that displayed a lot of bullish price action last week.  On the other hand, we have a North Korean leader playing with nukes and acting like he wants to pick a fight.  Mix in a President that has a Twitter account, that he’s not afraid to use and we end up with a lot of uncertainty right at the market highs.  Uncertainty and volatility are the likely results.  All weekend I have seen people trying to predict what happens next.  Some are claiming the market will ignore North Korea and we are going to the up.  I saw one ridiculous prediction that the Dow was going to 50,000.

Then there are the Gloom and Doomers predicting that the end is near and the market is destined to collapse.  Run for the hills!  There are others that suggest the market is setting a trading range that it could be in for years.  For what it worth I think predicting is a waste of time.  Predicting creates a bias, and bias can blind you to the clues that price is providing.  Predicting the market is a lot like trying to rope the wind.  It’s a lot of effort for nothing.  Focus on price and follow it when it shows a direction.

On the Calendar

This short week Economic Calendar begins and pretty much ends with Factory Orders at 10:00 AM Eastern.  Forecasters see a decline in Factory Orders of 3.1%  even though most of the underlying data would suggest strength.  An interesting discrepancy but the Factory Orders number is normally not expected to move the market substantially.  We have three Fed Speakers today and some bond auctions to round out today’s calendar.

There are on quite 30 companies on the Earnings Calendar today.  A quick look through them and I don’t see any market moving reports.  However, if you happen to hold a company that surprises you with a report because you failed to check it can be very damaging to your account.  Make sure always to check and be prepared with a plan around an earnings date.

Action Plan

Friday price left us with a little indecision while it rested ahead of the 3-day weekend.  This morning we have a bit of a conundrum.  Markets displayed incredible bullishness in the rally off the lows last week.  Both the QQQ’s and the SPY managed to break out while the DIA and IWM still have work to do.  Toss in the very risky game the North Korean leader is playing, and we end up with with a big pile of uncertainty.  I would like to think cooler heads will eventually prevail but the market hates uncertainty.  Dow futures are pointing to a gap down of more than 60 points at the open.  If the Bears take over, we could see failure patterns develop at market highs.  Not good!  If the Bulls step up to the plate and defend, we could strength in the rally.

The big question is, are you willing to speculate that you know the direction and willing to risk capital?  For me, the answer is no.  I will stand aside from entering new trades until price shows me clues of direction and then I will follow the winning team with higher probability trades.  We don’t have to take every day to be successful traders.  Also, we don’t have to pick exact tops and bottoms to be profitable.

Trade Wisely,

Doug

New Record Highs in the Tech Sector.

With an impressive display of strength, the Bulls managed to make new record highs in the tech sector once again.  It’s as if North Korea disappeared and the devastation on the southern coast never happened.  The Bulls are large and in charge as we begin September.  Futures are suggesting yet another gap up, and the VIX is once again testing historical lows.  As we say all the time, “Trade with the trend until the trend ends” and the trend except for the IWM is up.  With a gap at or near new market highs always watch for possible whipsaw price action.  I’m not saying it is, but it’s the perfect place to set a bull trap much like the gap down on the 29^th turned into a Bear trap.

On the Calendar

The Friday Economic Calendar kicks off with the granddaddy report of the month.  Before the market opens at 8:30 AM Eastern the Employment Situation Report is released.  Forecasters are looking for this number to cool off to 180K vs. the 231K reading last month.  At 9:45 we get the PMI Mfg Index which last month was 53.3, but there seems to be no forecast for this month.  At 10:00 AM the ISM Mfg numbers is the other big number today that could move the market.  The ISM August consensus is calling for continued strength at 56.6 vs. 56.3 in July.  Construction Spending and Consumer Sentiment is also at 10:00 AM today.  Construction Spending is expected to bounce higher today.  The consensus of Consumer Sentiment suggests it likely diminishes slightly to a 97.4 reading.

On the Earnings Calendar, there are less than 20 companies expected to report today.  I would expect none of them to be market moving, but please continue to check your holdings as part of your morning prep.

Action Plan

With three days of amazing bullish strength, the QQQ set a new record high yesterday with buying right into the close.  The SPY was also very impressive however it continues to remain under price resistance although very near new highs.  The DIA decided to take a siesta yesterday after gapping up choosing to just lounge around in a small chop zone.  And although the IWM still has a lot of recovering to do it also pushed up strongly to test resistance levels.

With the Bulls continuing to push on the futures, it is pointing to a gap up of more than 50 Dow points.  Personally, I don’t want to chase the gap at or near market highs.  I will focus on the price action after the open looking for follow through buying before deciding to add new positions.  Because this is Friday and we have had an amazing reversal I will be planning to take some profits today before the weekend.  With the Bull running hard the VIX has dropped back into the zone of historic lows.  When there is no fear, big moves are possible but also know they can also be very volatile.

Trade Wisely,

Doug

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