Things that make you say Hmm?
For those of us that watch price action yesterday left us with more questions than answers. Clearly, bearish candle patterns were left behind, but the majority of the indexes are still in up-trends. Things that make you say Hmmm? As of now, only the QQQ is showing technical damage. From the candle patterns, most traders would expect a big increase in fear, but the VIX seemed only to yawn in boredom. There is an abundance of clues to suggest caution but also a sense that anything is still possible. With weighty decisions still to be made in Congress this week expect the market to be very sensitive to the news cycle. Plan your risk carefully and continue to watch for violent price moves in reaction to news events.
On the Calendar
We kick off Tuesday’s Economic Calendar with the International Trade Report at 8:30 AM. Once again the international trade deficit is expected to widen in October. Forecasters see a 47.4 reading vs. 43.5 in September. At 9:45 there is PMI services which is not expected to move the market coming in unchanged at 54.7. Then at 10:00 AM we get the ISM Non-Mfg. Index which posted its highest score of 60.1 in October. Consensus expects this number to remain very strong only slowing to 59.0 in November. A couple of bound auctions will round out the rest of calendar.
On the Earnings Calendar, there are 38 companies reporting quarterly results. Notable are AZO, BMO, and TOL before the bell with PLAY and RH after the bell today.
Action Plan
After opening at new record highs in the DIA, SPY, and IWM profit takers took the gift of the gap and rang the register. Selling off to fill the gap obviously left behind price action candles suggesting a least a tempory top. The QQQ’s gave a half-hearted attempt to show bullishness with a gap up, but this index suffered significant technical damage. Not only did it leave behind a bearish engulfing it also printed a lower high failure.
This morning the Dow Futures are pointing to a gap up while at the same time the Nasdaq Futures suggest a gap down to a new low. Surprisingly with all the selling yesterday day the VIX didn’t register a groundswell of fear as one would have expected. The overall trends in DIA, SPY, and IWM are still up despite the bearish price action signals. So although there are a lot of clues suggesting caution only the QQQ has built a case for bearishness. Personally, I will be taking a wait and see approach without bias as to direction. I continue to expect market sensitivity to the D.C news cycle making violent price moves possible.
Trade Wisely,
Doug
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Bulletproof?
With the futures pointing to a 200 point gap up in the Dow on the back of the Tax Reform bill passage, it would seem the market is bulletproof. Even the threat of nuclear war seem to be nothing more than an annoying mosquito easily shooed away. Now the Dow has 25,000 in its cross-hairs and seems to have all the money and energy necessary to drive for that goal. However, I doubt the ascension to this plateau will be a smooth one. Friday’s full reversal intraday whipsaw may be a clue to fast and whippy price action ahead. Big price action swings could be possible as we move forward making it very challenging for swing traders. The bulls are obviously in control, but Friday’s price actions should serve as a reminder that the bears are still here and they have been waiting to eat for a long time. Plan your risk carefully.
On the Calendar
On the First Monday of December, the Economic Calendar has a light day. At 10:00 AM we get the Factory Orders report which will likely show strength and confirm expectations for fourth-quarter manufacturing strength. After that just a few bound auctions and a nonmarket moving TD Ameritrade report.
On the earnings calendar, we have 14 companies reporting today. A quick scan of the list and I don’t see any that are particularly noteworthy unless of course, you happen to own one of them. Make sure to keep checking and remember you’re the boss. Expect the best from yourself.
Action Plan
Last Friday I suggested that the market was going to be very sensitive to the news and to prepare yourself for possible violent price moves. During the Flynn testimony, we go just that! A very fast and nasty whipsaw that looked like it had completely reversed in just 20 minutes of trading. The promise of the tax reform bill likely to pass in the Senate revered it once again as the bulls regained control.
Now that the bill has passed the bulls are running hard this morning. The Dow Futures are pointing to a gap up around 200 points and sending the charts into a parabolic territory. One would think a huge selloff should be just around the corner, but I sure would not want to be betting against the strength of this bull run. In fact, with Dow 25,000 in sight, it’s likely to attract the bulls like a moth to a flame. Continue to trade with the trend but plan carefully and avoid chasing. Expect elevated volatility with triple-digit gaps and whipsaws possible in the days ahead.
Trade Wisely,
Doug
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Political Drama
Yesterday the Tax Reform bill appeared to be a slam dunk and a vote to was expected to happen at any time. I mentioned yesterday the next couple weeks could be bumpy as all the political drama unfolds. Last nights delay has the Washington spin machine at high speed with both sides churning out more and more dramatic rhetoric. Listen closely, and you can hear the dramatic music reaching a crescendo. One side vows to save the day while the other promises to fight to the death because of horror this bill will bring. Blah, Blah Blah! Unfortunately, the stock market is directly in the line of fire. Traders should be very cautious. Violent price shifts are possible in either direction so plan your risk accordingly.
On the Calendar
Friday’s Economic Calendar has several important reports this morning, but before that happens, we will hear from two Fed Speakers. Bullard speaks at 9:05 AM and Kaplin at 9:30. The PMI Manufacturing Index is at 9:45 AM and forecasters expect a very strong 54.5 print today. At 10:00 AM the IWM Mfg. Index has topped consensus several weeks in a row. However, the forecasters today call for a slight pullback to 58.4 vs. 58.7 last month. Construction Spending is also at 10:00 with the October’s consensus increase at 0.5% due to strength in single-family home building. And then who would have guessed we will hear from yet another Fed speaker at 10:15 AM.
On the Earnings Calendar, we only have 18 companies reporting today none of which are particularly notable.
Action Plan
The promise of Tax Reform spurred the bulls into a full-on stampede yesterday as traders seemed to buy stocks with both hands. The Dow smash through 24,000 finally coming to rest up a whopping 331 points on massive volume. It’s also interesting to note that the VIX also rallied suggesting fear at this evaluation is growing. OPEC’s decision to extend their production reduction program also played a part in pushing the market higher. Oil companies surged higher on the news.
This morning futures are looking lower because the Tax Reform bill suddenly seems to have lost votes. The Senate now says the vote could happen today, but they are scrambling to rewrite provisions of the bill on the fly. I repeated over and over yesterday in the trading room a warning to not chase this rally. Those that did could have a tough lesson learned today. If by chance they fail to get this bill passed we could experience a very dark in the market.
Trade wisely,
Doug
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Washington DC Spin
The US Senate is now the top focus of the market as the Tax Reform bill head to the floor for debate. According to reports, a vote could come before the end of business Friday. In my opinion, there is never a more dangerous time in the market then when Politicians, rhetoric and the Washington DC Spin machine is in control. Anything is possible, and high volatility and big intra-day swings can occur. Also, keep in mind that even after the Tax Reform dog and pony show is over we still face a Federal Government shutdown in early December. Who knows what kind of political drama that could create. I suggest if you do trade then trade small and stay on your toes because the price could be very bumpy the next couple weeks.
On the Calendar
The Thursday Economic Calendar begins at 8:30 AM Eastern with two important reports. First, the consensus for the Jobless Claims number this week is 240K vs. 239K on the previous reading. If not for the impacts of Puerto Rico Jobless Claims would be at or near historic lows. Second, is the Personal Income and Outlays report. Personal Income is see rising 0.3% while consumer spending could slow slightly to 0.3%. The Core index expects a 0.2% increase for a yearly rate fo 1.4%. Also at 8:30 AM we have a Fed Speaker and then another at 1:00 PM to pontificate on interest rates. At 9:45 AM is the Chicago PMI which forecasters are calling for a decline to 63.5 vs. 65.2.
On the Earnings Calendar, we have 38 companies reporting. Please continue to check current holdings as well as those you are considering for purchase for reporting dates. Just a few seconds of effort can save you from significant losses if a company reports poorly.
Acton Plan
Yesterday’s price action left behind patterns of uncertainty in the DIA, SPY, and IWM. The QQQ’s on the other hand, reminded us that the bears still exist and their teeth are very sharp! Many trends in the Tech sector broke down yesterday, and there are reversal patterns galore. As bad as it was, please remember it’s not the first move lower that matters. A failure to make a new high after it bounces is where the real selling could begin. The sky is not falling.
New out of Washington that the Senate voted mover the Tax Reform bill forward to floor debate has fired up the Futures this morning. Currently, the Dow futures are suggesting a large gap up at the open. Remember gaps to new market highs can create whipsaw price action producing fast intraday reversals. Be careful not chase and get caught up in the morning drama. A vote to pass the Tax bill could happen within the next 24 to 48 hours. If it happened to fail; well, use your imagination.
Trade Wisely,
Doug
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Tax Reform
With the Tax Reform bill looking as if it will pass, markets thumbed their nose at North Korea. Who would have guessed that money trumps a threat of nuclear attack? With all this going one would have expected the VIX the have gone wild. Oddly enough the VIX barely moved the entire day! Futures markets want the party to continue this morning with Dow pointing to a gap up around 70 points. Anyone caught holding short positions yesterday got completely run over by stampeding bulls. A very good reminder that shoring an up-trending market is an unwise business decision. Stay with the trend but avoid the temptation to chase and consider taking profits into strength.
On the Calendar
The Economic Calendar starts off with the very important GDP report at 8:30 AM eastern. The 2nd estimate for the 3rd-quarter GDP is expected to come in higher at 3.3 vs. the 3.0 on the first reading. Oddly enough consumer spending is expected have nearly paused, up from 2.4% to only 2.5%. The overall GDP Pirce index is expected to remain unchanged at 2.2%. Janet Yellen speaks at 10:00 AM while the Pending Home Sales Index reports. Consensus expects a sharp rise of 1.0% in October pending home sales. At 10:30 AM is the EIA Petroleum Status report which they don’t estimate forward, but a recent pipeline problem may have decreased stockpiles. There is another Fed speaker at 1:50 PM followed by the Beige Book at 2:00.
On the Earnings Calendar, I see 49 companies reporting results today. TIF is one of the companies reports before the bell while LZB, HOME, JACK, and WDAY are among those reporting after the bell.
Action Plan
All four major indexes ignored the threat of a North Korean nuclear attack setting new record highs across the board. Amazing and just a little spooky is the fact that the VIX barely moved yesterday in response to such a strong rally. Very odd. Even the IWM pitched in yesterday showing nice energy as it reacted higher from price support. Logic would suggest after such a big move the market would take a rest, but currently, futures are pointing to a gap up of nearly 70 points! The surge in bullishness seems to be the direct result of the Tax Reform bill looking as if it will pass.
Thank goodness we stuck to our rules and continued to trade with the trend because we were nicely rewarded yesterday. Continue to trade long but please avoid chasing as this kind of wild bullishness can suddenly find profit takers. Remember the rule, take profits into strength!
Trade Wisley,
Doug
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The American Consumer
The American consumer is alive and well according to the sales numbers during the Thanksgiving holiday. Black Friday sales reached new record highs, and now the Cyber Monday sale topped all-time highs coming in a 6.56 billion. The market lacked volume because everyone must have been online looking for deals. As those credit cards begin to cool down the Tax bill in Congress is seriously heating up. Even the President himself is working the Hill trying to secure enough votes to pass this major reform bill. Expect the market to be sensitive to the news on the bill’s progress. Big an very fast price action moves could be possible as the potential votes are won or lost. Let’s hope the Presidents Twitter feed remains quite on the subject! Plan accordingly.
On the Calendar
We kick off the day on the Economic Calendar with the 8:30 AM Industrial Production report. October is expected to widen the deficit from 64.8 billion to 64.1 September. There will also be an advanced report used for GDP inputs. At 9:00 AM is the Case-Shiller home prices number which consensus expects a 0.4% increase in September. At 10:00 AM we get the Consumer Confidence Report which last month was at a 17-year high but is expected to pull back slightly to 124.5. We have Fed Speakers at 9:15 and at 10:00 AM as well as several other nonmarket-moving reports.
On the Earnings Calendar, we show 46 companies reporting today with the biggest group coming after the bell. ADSK, MOMO, AABA, and MRVL are some worth noting.
Action Plan
Yesterday the market just seemed to wander around lacking volume an purpose. Pretty much as expected with extended vacations and Cyber Monday shopping. Unfortunately, the lackluster day left behind questionable daily candle patterns hinting of slight bearishness not nearly enough to shift the bullish trend. This morning Futures are pointing to a gap up open on the back of a new record with more than 6.5 billion in Cyber Monday sales. A very good week to be in the shipping business!
I will continue to look for new trade entries, but I will not chase or force trades. Trading for the sake of having something to do is unwise. I get the sense the market is waiting around to see if Congress follows-through on their Combo Tax Bill – Kill Obamacare plan. A failure to pass could move the market sharply lower so expect the market to be very sensitive new reports. Very fast reversals as this congressional battle progress and the Washington spin machine whips up the drama.
Trade Wisely,
Doug
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Back to Work?
With the holiday behind us and the Black Friday shoppers, credit cards still smoldering its time to get back to work. Or is it? Those clever retailers will have much of the online-shoppers testing their credit limits with the so-called Cyber Monday deal. Many folks will be back at work, but you can bet their productivity will be lacking as they chase the next flash sale to hit the internet. Keep in mind that the market will be sensitive to the sales numbers produced today. With many traders likely extending the holiday with vacation time and the millions of Cyber Monday shoppers focused on typing in credit card numbers don’t be surprised to see light volume and choppy price action today.
On the Calendar
The Economic Calendar begins the week with a potential market-moving report at 10:00 AM eastern. New Home Sales surged to in September with the largest percentage gain in 28 years and reaching a 10-year high. As a result, the consensus for October new home sales is for a sizable step back to 660K vs. 667K in September. AT 10:30 AM the Dallas Fed MFG. Survey continues to remain strong showing little to no effect from hurricane Harvey. Go Texas! Consensus for November expects a strong print of 24.5. There are several bond auctions today as well as two Fed Speakers this evening at 6:00 and 7:00 PM.
There Earnings Calendar shows just over 30 companies reporting results today. I quickly scanned the list, and I don’t see any big name market-moving reports. However, unknowingly holding a company that’s reporting can certainly move your portfolio. Please make sure to continue checking reporting dates.
Action Plan
As you all know, I went into the Thanksgiving weekend very light in my accounts. Consequently, I will be actively looking for new trades this week. During the evening Futures were headed lower, but around 1 AM they began to rally and currently suggest a modest gap up this morning. On Friday both the SPY and the QQQ’s closed at new record highs while the DIA and IWM choose to consolidate. The QQQ’s have gained market leadership, and as of now, the DIA appears the weakest and not quite able to breakthrough price resistance highs.
On Friday the VIX made a new historic low dipping to 8.56 but quickly seemed to reject that low rallying more than a full point higher. Volume could continue to be light today as may traders likely extended the holiday with some vacation time. With the VIX so low I would also not be surprised to see a bit more volatility. Watch for whipsaws and head fake’s and don’t rule out the possibility of full reversal patterns.
Trade Wisely,
Doug
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Bears in a Hurt Locker
The Bulls executed a perfect blitz yesterday, overwhelming the Bears and putting them in a hurt locker. For those of us that stayed with the trend, the rewards were fantastic and a reminder to avoid predicting a top. We had new Record High Closes on all the major indexes as this historic bull run continues. Today after the early morning rush I’m expecting the volume to drop off dramatically for 2-reasons. First, traders will extend the holiday and today will be the big get-away-day. Secondly, we have the FOMC minutes coming out this afternoon, and price action normally gets light and choppy ahead of the release. I won’t totally close the door, but I will say it’s highly unlikely that I will add any new positions today. In fact, I will look for profit taking opportunities to reduce risk ahead of the holiday.
On the Calendar
The Wednesday Economic Calendar is a busy one with several potential market-moving reports. 8:30 AM Eastern, Durable Good Orders – Consensus expects a 0.4% increase in durable good orders, take out transportation the number rises to 0.5%. The core capital goods are expected to increase by a very healthy 0.5%. Also at 8:30 is the weekly jobless claims that forecasters see rising from 240K to 249K largely due to Puerto Rico hurricane victims. Consumer Sentiment comes out at 10:00 AM and is seen remaining historically high at 98.1. 10:30 AM brings the EIA oil status report which has been showing supply increases as demand declines. Finally at 2:00 PM, the FOMC Minutes, rounds out the day.
We only have just over 30 companies reporting today but keep an eye on DE as it reports before the bell and could easily move the Dow index.
Action Plan
New records for all of the 4-major indexes as the Bulls squeezed early short traders into covering trades. I must admit I was tempted to put on some short trades last week, but after a close look at the charts I stuck to my rules and stayed with the trend. As a result, Right Way Options members took several very nice profits yesterday. As of right now, the Futures are suggesting more bullishness at the open with Dow gaping higher about 30 points. Of course, all the economic news and earnings reports could extend or erode the morning sentiment.
As per the plan, I have taken profits this week thus lowering my risk as we head into the holiday. Honestly, there is not a thing wrong with the charts. The trend is still very much intact but anything is possible, and I want to enjoy the holiday knowing a large portion of my capital is safely tucked in. Of course, I will continue to hold a few positions, and long-term holdings will not change.
Trade Wisely and Happy Thanksgiving!
Doug
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Defend Price Support
It was nice to see the Bulls step up and defend price support levels yesterday. Futures are suggesting the first directional follow-through in the Dow for the last 5-days of trading. Even the Dow Transports, (IYT) held support suggesting at least a short-term rally could be in the cards. The VIX which was stubbornly clinging to price support level finally gave way to bullishness sinking sharply by days end. Let’s keep in mind that even though the futures are pointing to a nice gap up that Thanksgiving is just 2-days away. Volumes could begin to drop off quickly at any time. Even the best of trade signals can and will stall if volume dries up so keep that in mind as you plan.
On the Calendar
On today’s Economic Calendar we have the very important Existing Home Sales at 10:00 AM Eastern. Home sales rose slightly by 0.7% in September to a 5.390 Annualized rate. Forecasters are suggesting a solid growth in home sales with an expected October print of 5.440 million. There are a couple of mid-day bound auctions, but then at 6 PM, Janet Yellen Speaks.
On the Earnings Calendar, we have just short of 60 companies reporting earnings today. LOW has already reported better than expected results this morning. Others include CPB, JEC, KIRK, MBT before the bell and CPRT, CRM, GES, DRYS and GME after the bell.
Action Plan
The market opened a bullish yesterday but a bit on pins and needles with the question; Will the Dow hold at support? The answer came back as yes and now requires a bullish follow-through to confirm. Both the SPY and QQQ’s turned in a lackluster performance yesterday while the IWM continued to show life rallying back toward resistance. As I write the Futures markets are bullish across the board suggesting might actually see the second day in a row in the same direction. Something we have been unable to do for the last five trading days!
Of course, I will continue to manage current positions, but as we move toward the holiday, I will be watching closely for reasons to take profits and reduce risk. I will also continue to look for new entries and building the watchlists of qualified stocks. Be prepared for the possibility that volumes could begin to drop off quickly as Thanksgiving approaches. Great by signals produced in the morning rush can easily die on the vine as volumes drop into the afternoon. Remember it’s the big institutions that move the market. As their traders pack up for holiday vacations volumes can drop quickly, and the price action becomes choppy, boring and virtually untradeable. Keep that in mind as you prepare plans for the remainder of the week.
Trade Wisely,
Doug
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For those of us that watch price action yesterday left us with more questions than answers. Clearly, bearish candle patterns were left behind, but the majority of the indexes are still in up-trends. Things that make you say Hmmm? As of now, only the QQQ is showing technical damage. From the candle patterns, most traders would expect a big increase in fear, but the VIX seemed only to yawn in boredom. There is an abundance of clues to suggest caution but also a sense that anything is still possible. With weighty decisions still to be made in Congress this week expect the market to be very sensitive to the news cycle. Plan your risk carefully and continue to watch for violent price moves in reaction to news events.
