Is there a storm on the horizon or just a lot of hot air?
Today’s market is filled with news-driven events most of them political in nature. Could there be a storm on the horizon or will it be nothing more than a lot of hot air blowing around? Who knows but one thing for sure is that it is likely to be great fodder for Saturday Night Live skits! I would recommend caution with the futures pointing to a gap up open ahead of all the events about to unfold this morning. Anything is possible, and I think it would be wise to plan for whippy price action today. As the drama is acted out on both sides of the political isle swift price moves are possible. Although I will looking for new trades, I have no desire to compete with a three ring circus. As a result, so I will be waiting for price action to settle and show me the way.
On the Calendar
Today we have a lot for the market to chew on, but most of it is not on the Economic Calendar. First up we have the weekly Jobless Claims at 8:30 AM Eastern. Claims continue to be unusually low pointing to a strong labor market. The positive trend is expected to continue with the number released this morning. In fact, it would likely have to come in as a huge surprise to move the market.
On the Earnings Calendar, there are 36 companies expected to report today. Marke sure to check current holdings and new purchases for potential earnings reports.
The big events will be in the news today. First off we have ECB decision this morning with a speech following by Draghi. Obviously, this can move the market if there is something unexpected revealed. Later today at 10 AM the circus act in Congress will begin the testimony from Jame Comey. The market saw a slight rally yesterday when details of his interactions with the President were released. It would appear that there is no smoking gun despite all the rhetoric. Of course, if something groundbreaking said during the testimony the market could react wildly so plan accordingly. There is also the possibility of market turmoil with the parliamentary elections in the U.K. and their impacts on Brexit. A wild and wooly day to be certain.
Action Plan
With so much potential market moving news this morning I want to be very cautious this morning. Currently, the futures are pointing to a gap up open setting the stage for a whipsaw price action ahead of all the news. If something unexpected happens to be revealed in the Comey congressional dog and pony show swift price moves are likely to occur. Anything is possible today so have a well thought out plan for current holdings as well as new positions you are considering. I will be looking for new trades, but I will move slowly as these events unfold.
Another issue to be mindful of is the unusual price action of bonds moving higher with the market. Normally bonds would decline as the market rises, but right now bonds have been gaining ground right alongside the overall market. I’m not suggesting this is signaling impending doom, in fact, I don’t know what to make of it, but I do think it requires our attention. Perhaps it’s nothing, but it is odd and may be providing clues to growing market fears.
Trade Wisely,
Doug
Productive price action as the market rests.
Thus far the pullback/rest is showing productive price action in my opinion. Healthy markets commonly rest or pullback to test price supports. As of now, this resting pullback is not showing signs that the bears are taking over so far. Of course, that can always occur very quickly around new market highs. As the overall trend is still up will remain bullish, but I also want to be prepared in the event the Bears decide its time to feed. Always keep in mind that whipsaw price and swift reversal are common around potential market tops. Although fear is essentially not present at the moment we all know how quickly that can change so be prepared.
On the Calendar
The only thing of significance on the Economic Calander this hump day is the EIA Petroleum Status Report at 10:30 AM Eastern. The last three reports have shown a decline in supplies, but the news lately from US producers suggest they have no intentions of slowing down. As a result oil prices and oil companies have continued to show weakness. Today’s number could easily move if this market.
On the Earnings Calendar, there are 29 companies expected to report earnings this morning. A quick scan of those on the docket there is none that would normally move the market. However, if you own or happen to be considering one of these companies, please understand the implications.
Action Plan
The market having rested a couple of days and pulling back to an area of possible support is healthy price action in my opinion. Futures have been dancing around the area of a flat open this morning. I think the Oil status number could be very influential on the market direction today. A build in supplies would be negative while a reduction in supply is positive for oil prices.
I will, of course, attend to current positions first but will continue looking for new long positions staying with the direction of the overall market. I will be very watchful for whipsaw price action at these levels and will exercise caution on new trades until I see the Bulls picking up their activity.
Trade Wisely,
Doug
Price action indicates the Bulls are firmly in control.
Price action clearly shows that the Bulls are large and in charge. Not only did the step in defending price support but they smashed through the ceiling setting new records. On this profit taking Friday, I plan to do some selling into this strength and going to the bank ahead of the weekend. Futures are suggesting a strong gap up this morning so be watchful of whipsaws that are common at price highs. As a personal note, I am still very concerned about the potential effect of complacently with the VIX near historic lows. Although I will be taking long, I will also be on guard and prepared if this wildly bullish enthusiasm happens to reach an exhaustion point.
On the Calendar
Normally I would say this morning we finally get the number the market has been waiting for, The Employment Situation report. However, the market seems to be waiting for nothing with the stellar performance of the Bulls yesterday, and the huge gap up the futures are expecting this morning. None the less the 8:30 AM Eastern Employment Situation number is a critical indicator of economic health. Consensus suggests another very strong number of 185K jobs created and the unemployment holding at historic lows of 4.4%. In focus today will be the average hourly earnings which can provide clues to inflation. Forecasters say inflation is not on the rise expecting the hourly earnings to remain week at 0.3%.
International Trade also comes out at 8:30 AM and is expected to show the trade gap widened sharply in April which would be an economic negative. Also on the docket are two Fed speakers to round out this big week of data. We have a very light Earnings Calendar today with only six companies expected to report earnings.
Action Plan
The Bulls are in control and appear to be wildly strong pushing the DIA to a new closing record high while the SPY and the QQQ once again broke to new records. Remaining a bullish and staying with the overall trend of the market has once again proven to be profitable. Having said that this no fear market still gives me the willies! I will continue to trade long but because I do fear complacency I will remain laser focused on price action for clues of trouble. My job is to follow price not predict so that I will do exactly that. Friday is profit day, and I do plan on taking advantage of the strength of the market and take profits ahead of the weekend.
Trade Wisely,
Doug
End of Day Rally Inspires Cautious Optimism
The end of day rally yesterday was nice to see as the Bulls continue to defend price support. There are many that will point to the hammer candle patterns as signs of bullishness, and they could very well be correct. However, let’s not forget that the same candle pattern can also ba a Hanging Man because of its placement near all-time highs. Personally, I want to be optimistic that the Bulls are ready to push higher, but I must continue to prepare for the potential reversals. Remember price swings can happen very quickly at or near potential tops. Intraday whipsaw price action is common as highs are tested so it’s wise to be ready for additional volatility when planning new positions.
On the Calendar
Today is a busy Economic Calendar with reports that do have the ability of move the market. It starts off with the ADP Employment Report at 8:15 Am Eastern. The ADP number last month missed the mark calling for more jobs growth than actually showed up. Today they the number is expected to be between 170k to 177K jobs created. At 8:30 AM we receive the weekly jobless claims which have been tracking at 40-year lows. The PMI Manufacturing Index comes out at 9:45 AM. PMI is expected to come in with a very strong reading of 53.0 this month.
One of the heavy hitters this morning is the ISM MFG Index number at 10:00 AM. Consensus suggests the ISM will come in steady and strong with a reading around 54.6. Construction Spending numbers also at 10:00 AM have been tracking flat this year, but today forecasters are expecting an improvement. Last but not least is the very important Oil Status Report. If we want the market to continue marching higher, we will need some help from declining surplus supplies. There are 45 companies are expected to report earnings today.
Action Plan
The end of day rally yesterday was inspiring but fell just short of providing bullish confidence. I will approach the market today with some cautious optimism. Futures are currently flat, but with all the morning economic reports quick price swings will be possible. We must also keep in mind that the market may decide to simply wait for the Employment Situation number.
Trade Wisely,
Doug
Price action indicates fear of reversal is extremely low.
Although price action yesterday lacked energy it continues to suggest there is no fear. QQQ’s continued to dominate holding up all the other indexes and marking out yet another record high. VIX the so-called fear index is once again testing prices near historic lows. Overall market trends remain bullish, so I will continue to seek long positions but want to guard against complacency. Always be mindful around market highs that reversals are possible and can develop swiftly. Maintain focus on price action and be prepared to act no matter the direction avoiding personal bias.
On the Calendar
The hump day Economic Calendar starts will the Chicago PMI at 9:45 AM Eastern followed shortly after by Pending Home Sales at 10:00 AM. The Chicago PMI has been tracking strongly above the mid-50’s for several months in a row. Although consensus is expecting a slight pullback this month, the should remain over 57 suggesting economic strength. The Pending Home Sales Index fell last month, but forecasters are expecting a rebound this month.
This afternoon at 2:00 PM Eastern we get another reading of the Federal Beige Book. We will also hear from two Fed speakers today. One at 8:00 AM and the other well after the market close at 7:30 PM. On the Earnings Calendar, there are 40 companies expected to report today. Although there is no market-moving earnings report, it is still important to continue checking before entering new trades and managing existing positions.
Action Plan
Yesterday’s light price action was as expected, but there was notable strength in several tech sector stocks. QQQ, once again claimed new record highs while the other indexes lagged behind on anemic volume. Futures has fluctuated this morning between negative and positive readings. I am hoping to see slightly more energy today but will continue to be very picky until I see buyers actively stepping in at these levels. I will continue to remain bullish if the uptrend continues to hold.
Keep in mind that with all the data points building toward the big Employment Situation report on Friday, that light volume choppiness is possible. Although I want to trade with the direction of the market, I want to be mindful not get overly long until we see price action proof that new support levels have buyers defending them.
Trade Wisely,
Doug
Sell in May and go away? Not so much!
This year those that followed the old axiom, “Sell in May and go away”; missed out on big time. Fear of a sell remains at near record lows, and it seems even the smallest selloffs attract dip, buyers. Nothing about this year has so far has qualified as normal. As a result, we must remain very focused on price action clues and prepared for anything. That means don’t become complacent thinking that the market it too strong to sell off because that is a mistake that can remove all your profits for the year very quickly. If buyers continue to show strength at these levels, we must also be ready to act.
With no major news events over the holiday, I would expect a light volume day as many traders will have planned extended vacations.
On the Calendar
Although this is a short week, the Economic Calendar is full of very big reports. It kicks off the today with Personal Income and Outlays at 8:30 AM Eastern. Consumer is spending is expected to see an improvement over last month, but consensus suggests personal income will remain soft. At 9:00 AM we get the S&P Case-Shiller numbers followed by the Consumer Confidence reading at 10 AM.
Housing demand has been extremely strong this year bu the Case-Shiller number is expected to soften from 6% to 5.8%. Consumer Confidence is also expected to retreat ever so slightly today but continues to remain very strong and near 20-year highs. There are only 33 companies on the Earnings Calendar today, and there are none that would likely move the market.
Action Plan
Although it is likely to just a little more price action today, then we saw last Friday I am expecting much. There were not any major new events over the holiday, and the evil doers of the world behaved. Futures are pointing to a slightly soft open, but that should not be a surprise after last week’s breakout. My plan is of course to manage my current positions, but I will need to see some good price action before concerning myself with new trades. Ultimately I want to see the overall market test and hold the breakout of last week before getting too excited about adding new risk. Historically June is a month that is flat to just slightly positive. However, there is nothing about this year that has been normal, so we need to prepare for that fact that anything is possible.
Trade Wisely,
Doug
Preparation and discipline are vital at market highs.
I believe preparation and discipline are integral to a trader’s success. As the market entertains new record highs, thoughtful preparation, and the discipline to stick to a plan become vital. Those who choose only to view the market through rose colored glasses will miss important price action clues. Traders that only see gloom and doom are equally incorrect as they will fail to take action when the possibility of gains present themselves.
To be successful, a trader must set aside personal biases and realize that anything is possible. At or near market highs it is necessary to plan for and have the willingness to see the potential of price failures. It’s equally important to visualize the potential of bullish clues and have plans to capitalize on them if they occur. What we think should happen or attempting to predict what will happen next waste time and cloud the trader’s ability to plan objectively.
On the Calendar
The last Friday in May starts with two very important reports on the Economic Calendar. At 8:30 AM Eastern both Durable Goods Orders and GDP reports are released. At 10:00 AM the less impactful Consumer Sentiment numbers roll out. Durable Goods has been holding up quite well but today Wall Street number crunchers say we should expect a negative number today.
Of course, the GDP number is the biggy of the day and has the ability to move the market. The overall GDP number is expected to remain at 2.3 as a result of very weak consumer spending. There are only 14 companies on the Earnings Calendar today, and none of them should be very impactful to the overall market.
Action Plan
Friday is profit day, and ahead of a three-day weekend, it becomes even more important. In anticipation, I have been taking profits and trimming exposure to the market all week. There are several however that I plan to carry through the weekend unless something major changes today. Another factor to consider is that price support of the breakout still needs to be tested.
I will remain cautious until price action confirms support with buyers actively buying at this level. Obviously, if support happens to fail and the Bears would likely be emboldened to take control. I for one want to keep a very watchful eye on price action, and I plan to do so largely from the sideline to protect my capital. I won’t completely rule out adding new positions today, but it’s highly unlikely.
Trade Wisely, and have a fantastic weekend!
Doug
Gapping, to new record highs. Bulls are large in charge.
With the market gapping to new record highs we have applauded the Bulls. An impressive performance that was certainly not expecting. Now the bigger question has to be answered. Can the hold the new highs or could this be a beautiful head fake? Only time will tell, and I am only too happy to wait on the sideline for the answer. If they do hold, I will be ready to buy with both hands after the long weekend. I may regret waiting, but I will have a worry free 3-day weekend. What will you choose?
On the Calendar
Frist off the Economic Calendar docket this morning m is International Trade Goods at 8:30 AM Eastern. The trade deficit has been getting slightly wider over the last couple reports but not so much to have caused much of problem in the overall economy. Even so, we don’t want this to become a trend. Also at 8:30 we get the latest reading on the Jobless Claims which has been pointing to a growing demand for workers. A low number shows a strengthing economy but can also suggest that inflation it on the rise providing cover to the FOMC for more rate increases. I know it’s a bug surprise, but there will also be a couple of Fed speakers today!
On the Earnings Calendar, we have 72 companies reporting today. Rental reports are heavy on the list today with ANF, BBY, BURL, COST, DECK, DLTR just to name a few. This sector has seen some significant challenges this quarter so let’s hope these companies report strong results.
Action Plan
Futures are pointing to big gap up this morning allowing not only the Q’s to make new record highs but also the SPY. The DIA and the IWM lag behind but should also show a very strong open today. A perfect V-formation is very rare in the market, but that is what we see right now in the charts. I can point to nothing other than the possible increase in inflation to explain this rally. All the uncertainty that created the selloff still exists. However, it is not our job to understand the why? Leave that to the talking heads. As traders, our job is to follow!
Unfortunately, this breakout is occurring directly ahead of a 3-day weekend. Because of that, my plan remains the same. I will not chase this move into a long weekend. I will continue to collect my gains as per my rules and manage the trades I continue to hold. I will be flush with cash next Tuesday and ready to buy if the market can hold this new level.
Trade Wisely,
Doug
Bullishness or complacency. You decide.
Do you believe the market is truly bullish or is this complacency? The Bulls have done a remarkable job in this rally but do they have the energy to break through resistance? The VIX suggests there is virtually no fear in this market. Could it be complacency? If I knew the answer to that, I would soon be very rich! Sadly I’m not able to see a future outcome. Thus I have to be prepared for anything. We have a three day weekend ahead of us, and in my opinion, uncertainty abounds. Have a plan. Don’t be like sheep, blindly strolling into danger just because others might be doing so. My recommendation is to be very cautious right now.
On the Calendar
Wednesday’s Economic Calendar starts off with Existing Home Sales at 10:00 AM Eastern. Home prices have been rising and days on the market have been falling this year. The numbers would suggest the economy is strong but also hints of inflationary factors heating up. At 10:30 we have the Petroleum Status Report. Efforts to lower supplies seem to have finally started to work, however, if there is an increase we can expect a negative market effect.
The big news of the day will be the FOMC minutes at 2:00 PM. With Fed members speaking almost every day I can’t imagine we will learn anything new, but they will make a drama out of it never the less. CNBC will play their most dramatic bumper music, and the talking heads will ramp up the emotion before and after the release.
Action Plan
You may have missed it, but there were some big news events overnight. The most important; Moody’s downgrade the credit rating of China do to their rapidly growing and massive debt. As of now, the markets have shrugged it off as if nothing happened. Personally, I think this is another clue of complacency and maybe a warning of troubles ahead.
I recommended caution yesterday and maintain the same stance today. A long as the market continues to test price resistance but shows the inability to breakthrough it I will remain cautious. For me, that means I will continue to trade long but will limit the number and size of my trades. I will be very picky on the trades I take and will have exit plans ready to execute on any clues of failure. Go Bulls!
Trade Wisely,
Doug
Is your bullish confidence stronger than your tolerance for risk?
Is your confidence in this rally enough to risk capital at resistance? The recovery from last Wednesday’s selloff has been impressive, but let’s keep the overall price pattern in mind. Price resistance is still price resistance and the uncertainty that created the selloff as not changed. Could the Bulls just plow right through to new highs? Obviously, the answer to that question is yes; resistance is not forever or unbreakable. However, the question we as traders have to grapple with is, how confident are you in the strength of the market at resistance?
One the Calendar
On the Economic Calendar, today is the PMI Composite at 9:45 AM Eastern follow by New Home Sales numbers at 10 AM. Both reports have the potential to move the market, and both are indicators as to the health of your economy. They have been tracking positive, but New Home Sale are leading the way with very strong results. On the Earnings Calendar, we have 41 companies reporting today. INTU is the big tech reporting after the bell today. Keep an eye on a couple of the room favorites MOMO reporting before the bell and TTWO reporting after the close.
Action Plan
At the risk of sounding like a broken record, I want to remain cautious when adding new risk. As you know, I’m currently long eight positions and want to avoid adding risk as the market tests resistance levels. Having said that there are a lot of good looking charts so if you decide to trade so be choosy. Markets can reverse very quickly at resistance so look for low-risk entries and consider smaller than normal positions.
Futures are suggesting another positive open. One of the things I always watch for when the market is testing resistance and the futures are pointing up is the whipsaw. Please understand I am not predicting that a whipsaw will occur. I am only pointing out that this is the perfect place for them to occur. The good news is whipsaw price action will usually show itself within the first 30 minutes of trading. Avoid rushing in at the open, and you can often avoid the whipsaw.
Trade Wisely,
Doug
