A case for caution.

Earnings season creates lots of drama, intrigue, and hype as well as the dream of striking it rich by picking the big winner.  It’s easy for even experienced traders to get caught up in the gold rush that earnings season creates.  It’s the same business plan that built Las Vegas.  Trading an earnings event is gambling pure and simple.  Anything is possible, and I think a good reason to build a case for caution.

Successful trading is not a sprint; it’s a marathon that requires careful planning and endurance.  We all want more but the allure of the big win is often the temptress leading us to slaughter.  With more than 800 companies reporting the next two days anything is possible and could make for violent market action.  I have learned over the years (often the hard way) I don’t have to trade every day to be successful.  As technical traders, we give up our edge by over trading earnings.  Think about it.  If anything is possible, isn’t that gambling?  How can technical analysis give us much of an edge if anything is possible?

On the Calendar

The hump day Economic Calendar has three potential market-moving reports.  At 8:30 AM Eastern is the Durable Goods Orders which consensus expects a gain1.0% overall.  Ex-transportation is seen as up 0.5% and core capital goods also increasing 0.5%.  At 10:00 AM we get the New Home Sales report which is expected to moderate to a 555k annualized rate in September vs. the 560K in August.  Then at 10:30 AM is the EIA Petroleum Status Report.  There are no forecasts for petroleum, but a quick look at oil stocks would suggest traders are bullish and expecting demand to continue to lower national supplies.

The earnings calendar has more than 300 companies reporting today.  If you need an example as to why you need to be aware of earnings reports take a look at CMG, JNPR, and AMD this morning.  These companies reported after the close yesterday.  Those traders will be singing the blues with big losses in their accounts today!

Action Plan

Although the DIA set new records yesterday on the back of great earnings reports from MMM and CAT, the other indexes took a little siesta from the rally.  Futures are pointing to a flat open currently but with so many companies reporting earnings today that could obviously change in very quickly.

The overall trends are bullish, but for most traders, I think it’s time to exercise a little caution.  With so much data coming out the next couple days could be very challenging.  Big gaps and whipsaw price action can damage the accounts of even the most experienced traders.  Try not to get caught up in the drama and hype surrounding earnings.  Remember we want Quality over Quantity and not every day has to be traded to be successful.

Trade Wisely,

Doug

Anything is possible.

With the market having risen so much so fast it’s easy to assume that the market is overbought and thus must go down.  As a result, traders will try to predict the roll over failing to consider the extreme bullishness of this rally and the huge number of earnings reports this week.  The fact is, Anything is Possible!  Good earnings reports could easily extend this bull run higher.  If they disappoint some violent moves lower are possible.

Yesterday the indexes left behind bearish patterns suggesting lower prices to come but the futures are pointing to a gap up open?  I expect this will likely be a very challenging market for next several days with lots of premarket gaps and intraday whipsaws possible.  Try to avoid predicting and attempting to apply your personal market bias and just follow price when it provides good entry signals. Also, keep in mind that successful trading does not require you to trade every day. Cash is a position that is often forgotten and underutilized.

On the Calendar

The Tuesday Economic Calendar kicks off at 9:45 AM Eastern with the PMI Composite Flash.  The October Composite Index expected to remain unchanged with a comfortably strong reading of 54.8.  Forecasters are expecting the manufacturing PMI to come up to 53.3 vs. 53.1.  The services PMI has been the leader with a 55.3 reading in September which is expected to pull back slightly to 55.2 for October.  FYI, PMI stands for Purchasing Managers’ Index.

There will lots of earnings news affecting the market today will about 190 companies reporting.  Just a few to take note of; MCD, CAT, LMT, GM, JBLU, BIIB, MMM, GLW, SHW, AMTD, LLY, PHM plus much more.  Make sure you are checking reporting date of companies you hold and those you are interested in buying.  Preparation is very important.

Action Plan

For the first time in several weeks, we saw a little profit taking in the market as the day wore on yesterday.  The DIA left behind a Dark Cloud Cover pattern while the SPY dropped in a full-on Bearish Engulfing Pattern.    The QQQ also printed a Bearish Engulfing, but it actually finished the day looking more like an Evening Star Pattern.  The IWM remained in its tight range consolidation but also printed an Evening Star type pattern.  With all these bearish patterns does not mean the market has to go down?  Nope!  Let’s keep in mind the sheer momentum of this rally and the fact that huge numbers of earnings reports are rolling out.  Anything and I mean ANYTHING, is possible!

Futures have been climbing all night and as of now suggest about a 50 point gap up in the Dow.  Possibly another short squeeze like last Thursday?  Your guess is as good as mine.  I will first manage current positions and but will plan to wait until after the morning rush before looking for new trades.

Trade Wisely,

Doug

A huge week of market events.

With seven potential market-moving economic reports and well over 1000 earnings reports, this is a huge week of events.  For new or inexperienced traders, weeks like this can be very challenging because volatility can suddenly shift market direction.  For the most part, I avoid earnings reports like the plague.  No matter how good a company may seem to play the earnings report is dangerous.  All of your technical analysis skills are useless because anything is possible when a company reports.

Times of volatility will also test your greed emotion to the max.  When your right on the direction and the stock move quickly in your direction, it’s wise to consider scaling out of the trade or exiting it all together.  Stock and quickly shift when there is so much news rolling out.  Also, remember gaps are gifts and a great time to go to the bank with at part or all of the position.  Don’t allow greet to prevent you taking a profit.

On the Calendar

The Economic Calendar starts off slow but has several very important reports during the week and finishes up with the market moving GDP numbers.  At 8:30 AM this morning we get the Chicago Fed National Activity Index.  It’s very unlikely to move the market, and I only mention it because other than that all we have is some bond auctions to round out the day.

The Earnings Calendar ramps up this week is likely to create some volatility as big newsy reports roll out.  Please keep in mind big market gap up’s and gap downs are common so plan your risk carefully.  Today is the lightest day on the calendar with just short of 80 earnings reports.

Action Plan

Having taken several trades off last Friday, we enter the market today light in our accounts.  Considering how stretched the market is I’m comfortable having less risk.  The futures are of course pushing for a higher open with the Dow right now showing a 20-point gap up.  Just like on Friday don’t be surprised to see whipsaw price action after the open.

I plan to give the market 15 to 30 minutes after the open to see there are real buyers interested at these levels before looking for new trades.  If the earnings reports continue to roll our positive, there is every reason to believe the market could still move higher.  I know logic says this rally can’t continue forever, but those that predict can easily get run over just like the those that got short last Thursday morning.  Stay with the trend until price tells you differently.

Trade Wisely,

Doug

The Bulls punish early Bears.

What an amazing recovery of yesterdays gap down is punishing those that attempted to predict the selloff was finally here.  Those that got short in anticipation are now being squeezed out as the Bulls punish early Bears.  A reminder that trying predicting the market is nothing more than gambling.  Traders with big ego’s of their predictive prowess often find themselves fighting the market rather than working with the market.  Believe me; I have the scars from making this mistake more than I care to admit.  The solution is simple but it very hard to learn.

As the market is rallying, try to be a profit taker and sell into strength.  When the market does roll over you will then be less affected.  Then wait for the market to prove it’s ready to go lower before jumping on board.  When your profits are safely tucked away in your account, you can afford to wait.  Always remember you don’t have to trade everyday to be successful.

On the Calendar

The last day of the trading week begins with Existing Home Sales at 8:30 AM Eastern on the Economic Calendar.  Forecasters expect the the number for September coming in a little lower at 5.300 million.  The slide in existing sales is a result of hurricane impacts.  The National Asso. Of Realtors has warned Hurricane effects may slow sales the rest of the year.  We have a Fed Speaker at 2:00 PM and Janet Yellen will Speak today after the market close at 7:30 AM.  Maybe at 2:00 PM is the Treasury Budget report which has already moved several times this week.

On the Earnings Calender, we have just short fo 50 companies reporting.  A lot of eyes will be focused on the Earnings out of GE before the bell today.  The companies stock has been in an ugly decline of around 25% this year.  There is a rumor out there that GE may cut or even suspend it’s dividend today which would likely send the stock much lower.  It will be interesting to see what happens.

Action Plan

After gapping lower yesterday the Bulls went back work and made quite a deminstration of strength.  The DIA set another new record high close by the end of the day.  The other indexed lagged behind but they all rallied signiffiantly off the morning lows.  The Futures this morning are now wildly bullish pointing to gap up of more than 80 points.  Count this as very good lession about trying to perdict the market.  I can guarantee part of the rally yesterday and this morning will be because a lot of folks anticipated a sell off and got short.  They are now getting run over and forced to buy to cover adding fuel to the rally.  A painful lession I had to learn the hard way.

It’s Friday and for that means profit day.  I will be much more focused on taking profits today rather than adding new risk.  Also, keep in mind that this mornings gap up in the Dow could produce whipsaw price action.  Chaiseing, today’s pop, would be very unwise in my opionion.

Treade Wisely,

Doug

The Bulls are firmly in control.

The Bulls are firmly in control and the Bears are either running for their lives or have gone into hibernation.  The news of the 23K Dow print spread like wild fire yesterday afternoon.  The President even chimed in on the subject as he was pushing for the tax reform legislation.  Those sitting out are really feeling the pressure of missing out right now and are likely to charge in pushing us even higher.  It may seem completely irrational and nonsensical to you but for goodness sake don’t try and fight this move.  To do so would be akin to trying hold back the tide.  Also don’t become complacent or chaise.  Focus on price and have a plan!

On the Calendar

We begin the hump day Economic Calendar today with Housing Starts at 8:30 AM Eastern.  The September consensus is 1.170 million annualized starts and 1.238 million permits which constitutes a slight slowing in both metrics.  At 10:30 AM the EIA Petroleum Status report will be released.  I think most are expecting to see demand growth and supplies continuing to decline slowly.  Then at 2:00 PM is the Beige Book and the Treasury Budget which come out about 2 weeks prior to the next FOMC meeting.  It’s unlikely they will move the market.

The number of reports continue to shuffle around a bit but today the Economic Calendar has about 80 companies reporting today.  AXP, AA, EBAY, UAL, UTI, KMI are just some of the notable reports today.  Please make sure to check reporting dates as part of your daily preparation.

Action Plan

Although I was sitting in a doctor’s office I caught the close on my phone and was not surprised to see new record highs once again.  For a moment the Bulls push the Dow over 23,000.  On my drive 2-hour home I was flipping through the radio stations and heard at least 3 reports on the 23k print and even a sound bite from the President.  I thought to myself the “Fear of Missing Out”, crowd will likely gap the market higher tomorrow.  As of now, that thought seems appears correct, with the Dow futures pointing to more than a 50-point gap up.

Don’t chaise but stay with the trend.  The bulls are firmly in control and as long earnings report continue to be mostly positive higher prices are likely.  Remember to take some profit along the way to relieve pressure on trades.

Trade Wisely,

Doug

The Trend is Strong

Just when you think the market is about to take a breath and rest the Bulls step up and drive us even higher.  Once again new record highs ring out inspiring more and more buyers to enter the market.  With earnings session underway anything is possible, but so far they have been coming in strong that could continue fueling the Bulls to push even higher. The trend is strong and clearly very bullish.

Don’t try and fight or just might find yourself under the hooves of charging bulls.  There was a time in my trading career when I believed I had gained so much knowledge and skill I could predict the market.  I would find myself often trying to fight the market trend allowing my bias to control my decisions.  Long story short, my accounts suffered tremendous damage as a result.  Whether it seems rational or not work within the trend as long as it continues.

On the Calendar

The Economic Calendar starts off with Import and Export Prices at 8:30 AM Eastern.  Conseensus sees a 0.5% gain vs. 0.5% percent last month.  At 9:15 AM is the most important number of the day, Industrial Production.  Forestasters are calling for a 0.4% September gain in production numbers.  Then at 10:0 AM the Housing Market Index is expected to hold unchanged at 64.  Then at 2:00 PM is the Treasury Budget wihich is calling for a 3.0 billion surplus.  Then at 4:00 PM is the Treasury International Capital which tracks financial instrments in and our of the the country.

The Earnings Calendar has bumped up to more than 50 companies expected to report results today.  JNJ, IBM, GS, PGR, CREE, HOG, MS are some of the notables reporting.  NFLX reported good results after the close yesterday.

Action Plan

I sometimes feel a little like Bull Murray in “Goundhog Day,” when everyday I repeat the market has once again set new records.  As is case for yesterday with the DIA, SPY and QQQ’s all closing at new record highs once again.  The IWM lagged behind choosing instead to remain in a tight consolidation range.  The VIX continues to hover just above record lows and hanging on to its sub ten reading.

Although this run seems to be a bit long in the tooth, the Bears seem to be no where in sight.  At this time there also seems to be no Fear of their return at the moment.  Common sense keeps telling me this can’t go on forever.  However betting against or standing aside in a wildly bullish market such as this would be a mistake.  If earnings begin to roll in showing that most companies can support these lofty price levels, then the trend up could continue much longer.  Set aside your bias and trade the charts in front of your with a focus on price action.

Trade Wisely,

Doug

The Bulls maintain market control.

Another weekend passes without a major incident effecting the market.  The Senate takes up tax reform, and earnings session begins to heat up this week.  Both could provide significant price action as well as increased volatility.  The futures are pointing to a slightly higher open today, as the Bulls maintain market control.

The Yellen speech on Sunday seemed to raise the likelihood of an interest rate increase in December.  Normally that is seen as a bearish signal, but lets keep some perspective and realize that would only bring the rate up to 1.5%.  If the market can’t handle a 1.5% interest rate, we will have far bigger problems in the economy.

On the Calendar

We begin a new week on the the Economic Calendar with the Empire State Mfg. Survey at 8:30 AM Eastern.  New orders are at and 8-year highs while delivery delay are at record levels.  This one of the first signals that an economy may start overheating.  Forecasters see the October number coming in at 20.5 vs. 25.2 last month.  The Treasury Budget is a 2:00 PM today but not expected to move the market.  There is on Fed Speaker late this evening and other than that just a few bond auction to round out the calendar.

This week the Earnings Calendar begins to ramp up with potential market moving reports.  It’s every traders responsibility to check reporting dates of the stock you own or are thing about buying.  Failure to do so can result in a very painful lession.  There are 27 reports today with the most notable report coming from NFLX after the bell.  The first of the so called FANG stocks could certanially have an overall market effect.  Time to prepare for higher volitality.

Action Plan

The Bulls continue to show incredible resielence, and there seems to be no fear of profit taking or retracement at the moment.  It will be interesting to see how stocks respond as earnings report begin to roll out.  Will earnings support these price levels?  Analysts say yes with an 11% growth expected overall this year.  Only time will tell.

Earnings Session normally kicks up the volitality.  Large market gaps ups or gap down open become much more likely so plan your trades accordingly.  As of now, the overall market trend continues to be up so I will continue looking for long trades to move with the trend.  The VIX does give me a little pause with it showing so much complaicency which should keep us focused on price action for clues of change.  At times like this, it’s important to trade what you see in the chart.  It’s so easy to missout on nice moves if you get caught up in your own pearsonal bias of what you believe the market should or should not be doing.  Always remeember that the market can remain irrational much longer that you stay liquid trying to fight it.

Trade Wisely,

Doug

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 48^th 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 48^th 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 4^th 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