Earnings fueled rally nearing 3-weeks up.
The current rally has been amazing with new records for the books almost every day on this earnings fueled rally. Hey, who doesn’t love market rally? Right! Profits are easier to make, and the world of the trader just seems to be filled with sunshine and rainbows. It’s often times like this when traders get complacent. Breaking the rules, rushing trades and/or over trading. If we fail to plan carefully, we invite emotion into our trading which normally ends badly. Maintain your discipline, be prepared and protect your capital from emotional decisions with a well thought out plan.
On the Calendar
The Economic Calendar begins with Durable Goods this morning at 8:30 AM Eastern time. Durable goods is a market moving number that has been a little soft with declines in both April and May. Consensus for this month is to see a big bounce back with an expected increase of 3.5% mostly on the back of the aircraft industry. Also at 8:30 AM is the International Trade in Goods number as well as the Weekly Jobless Claims. Trade goods are expected to come in with a 65.0 billion deficit which is an improvement from last month. Labor has been very strong, but there is an expectation of an increase to 240K from the 233K last reading. There are a few nonmarket moving reports, auctions and announcements.
Today is a huge day on the Earnings Calendar with nearly 450 companies expected to report results today. Believe me; it’s in your best interest to check reporting dates before entering new positions. It is equally important to check on reporting dates within your portfolio.
Action Plan
Yesterday the market pretty choppy which is normal on an FOMC announcement day but all in all the indexes held up pretty well. Earnings have already begun to roll in this morning with the majority being positive. Futures are currently reflecting that bullishness pointing to a slightly higher open, but it could shift quickly on the data laden day. As of right now the QQQ’s are showing yet another gap up open and another record level for the history books. The DIA and the SPY are not far behind.
As always my top priority is to manage current positions first and as we begin to wind down this trading week taking profits is also high on my list. I will, however, look for new trades today but much recognize the fact that the rally is nearing the 3-week mark. I’m not predicting a turn but if one did occur it should not be a big surprise so plan your trading accordingly and always have an exit plan.
Trade Wisely,
Doug
Plan for an extra dose of volatility.
With hundreds of earnings reports today and the FOMC announcement, we can likely expect volatility to kick up a notch. Extra volatility should not be feared, but every trader should have a plan in place to deal with it unemotionally. Please, Please, PLEASE make sure you are checking earnings dates on all stocks. As an example take a look at AKAM. AKAM had a beautiful entry signal at the end of the day. I would normally have bought the stock in a hot minute but checking earnings I discovered it was about to report. Thankfully I checked because the stock is gapping down almost 8% this morning! That few seconds likely saved me hundreds of dollars. Defentally worth the effort! With VIX so low there are many traders beginning to speculate the market is overbought. That could be true but trying to predict a top is a very difficult business that normally costs those that do a lot of capital. If you’re concerned about a market top, lock in profits and reduce trading activity. The market will tell us where it wants to go if we just wait and watch rather than predict.
On the Calendar
Hump day on the Economic Calendar begins with New Home Sales at 10:00 AM Eastern. Forecasters see home sales increased slightly to 611k consensus in June. Then at 10:30 AM we will get the EIA Petroleum Status Report. Oil supply levels have been trending lower in the EIA report, and continued reductions are very important to stabilize the commodity prices. Then at 2:00 PM is the all important FOMC Announcement on interest rates. The market is not expecting a rate increase today but keep in mind that all they have to do is change a word or two in their statement to move the market dramatically.
On the Earnings Calendar, there are 275 companies reporting results today. As of now, earnings have pushed the market sharply higher with no fear. Nevertheless, it is extremely important for every trader to find out when the companies they hold are reporting.
Action Plan
Overall we saw the indexes held up pretty well yesterday, but the price action was rather subdued as the market waits to hear from the FOMC. The bullish trend is still is still in place on a daily and the weekly charts. The best practice is to continue trading with the trend.
The trend is still up, so I will continue to look for long trades. However, I will be slow to enter new risk at this point in the rally. Although I have pickup some new trades, I have also been reducing overall risk taking profits on several positions already this week. My inclination is to continue to reduce risk as market extends this rally. Currently, futures are pointing to a small gap up open but keep in mind trading will today will not only be affected by hundreds or earnings reports but also the FOMC announcement.
Trade Wisely,
Doug
FOMC and Earnings a Volatile Combo
We have enjoyed the steady and strong rally, but the road ahead could be a bit bumpy ahead. As earnings reports ramp up and the VIX has fallen to historic lows. Toss in the FOMC, and we have an explosive combination that could trigger significant volatility. Price action is currently very bullish but doesn’t ever think the market is safe and simply can’t go down. Complacency is a very dangerous for traders. Anything can happen. Be prepared at all times. I am always especially focused on price action when futures point to a gap up to new market highs. It’s the perfect setup for a pump and dump by the big boys so don’t chase! Have the discipline to plan carefully and follow the plan. Your success depends on it!
On the Calendar
Today on the Economic Calendar there are three reports that are unlikely to move the market. They are the Housing Price Index, Richmond Fed MFG, and Investor Confidence. The two reports that could move the market is the S&P CoreLogic Case-Shiller HPI at 9:00 AM Eastern and the 10:00 AM Consumer Confidence. The Case-Shiller topped earlier this year and has since moderated. The number is expected to come in at 0.3% with the year-on-year number at 5.8. Consumer Confidence consensus for July is expected to come in at a very strong 117.0. Also, keep in mind that the FOMC meeting today with interest rate announcement at 2:00 PM tomorrow.
On the Earnings Calendar, we have 184 companies reporting today, so it would be prudent to stay on top of reporting dates for the companies you own and are thinking of owning. After the close yesterday, GOOGL seemed to have disappointed the market, and the stock is indicated down 25 points this morning. It will be interesting to see if that affects the QQQs and the very strong rally of late.
Action Plan
Yesterday’s trading started pretty slow and choppy but as the day progressed the Bulls seemed to gain the upper hand finishing the day strong. The DIA tested and so far held price support, SPY held up extremely well, QQQ closed at a new record high, and even the IWM rallied off of support. Consequently, price action continues to suggest bullishness. If earnings reports continue to impress the market, then we should expect more records high closes to come.
Today I will be looking for new positions, but I will also be watchful of whipsaw price action. Futures are suggesting a gap up open. Anytime I see the market gap up to new record highs I’m always watchful of the professional pump and dump creating that whipsaw price action which is very difficult manage. As a result, I will wait 20 to 30 minutes after the market opens focusing on price actions and making sure real buyers are supporting the gap. Please keep in mind the market would normally become soft as we wait for the FOMC. Toss in about 200 earnings report, and we have a potentially volatile combination. It would be wise to prepare for anything.
Trade Wisely,
Doug
Will earnings continue to support current valuations?
Third quarter earnings that began as a small creek will become a rushing river of reports for the next few weeks. Remember it’s not the actual report that matters its how traders and investors react to the report that matters. The market has been very bullish, and now it’s up to companies to prove that their earnings can support the current valuations. Make sure to check reporting dates on everything you hold or are thinking of buying and prepare with a well thought out plan.
On the Calendar
The last full trading week of July will begin with PMI Composite Flash and Existing Home Sales on the Economic Calendar. The PMI number is at 9:45 AM Eastern and is expected to slow for the 53.9 reading in June to around 53.2 in today’s reading. Although slightly slowing anything above a 50 reading demonstrates growth. The service sector continues to as the strongest growth sector. Existing Home Sales came out at 10:00 AM and expected to continue on it modest trajectory higher. However, the consensus number of 5.620 annualized units would show a soft spring in home sales.
There are 76 companies expected to report earnings today and will ramp up to nearly 500 on Thursday. It is vital for every trader to check reporting dates for companies held and those under consideration for purchase. Failure to do so could prove to be a very expensive lesson. Don’t rely on luck!
Action Plan
The Bulls held and defended a key support level in the DIA rallying off the level right into the close of the day. The SPY and QQQ’s remained strong and above supports although closing slightly lower. The IWM that finally broke out last week left behind a possible Evening Star Pattern but maintained just above the key breakout support. Futures were mostly down all evening and as I write this continue to point to a slightly lower open today.
After the impressive rally over the last 2-weeks, it would not be out of the question to see the market rest or even slightly pull back. However, it’s very important that the Bulls continue to defend support levels. Resistance breakouts are great but always remember that support is not support, until it’s tested and buyers step up to the plate and defend the price level. I will be looking for new trades today, but I will need to see some bullish energy in the overall market before doing so. RWO members Banked some nice gains last week. Now the trick is to hold on to those gains. As always be very choosy about the trade you take. Quality is far more important than quantity.
Trade Wisely,
Doug
Taking Profits to the Bank.
After posting the first 10-day bull run in two years, I have Taking Profits on mind this Friday. It has been an amazing run, and it’s very thoughtful of the Bulls to have kept it going to our normal profit taking day, Friday! With the QQQ’s and the SPY posting a hanging man pattern yesterday I am further encouraged that is time to go the bank. Please don’t misunderstand; I’m not suggesting the market is going start falling! I am merely suggesting there are enough clues that I need to take some profits and reduce my long exposure ahead of the weekend. After all, isn’t consistently profiting the goal of professional trading? Never let greed prevent you from taking profits on a consistent basis!
On the Calendar
Today we get a very nice rest on the Economic Calendar with only the Baker-Hughes Rig Count at 1:00 PM Eastern. The Rig Count tracks the number of actively operated oil and gas rigs. It a relatively benign number and very unlikely to move the market unless it reports a major surprise. That wraps up the Economic Calendar for this week.
We also get a Friday break on the Earnings Calendar with only 34 companies reporting earnings. Some the notables are CL, HON, GE, and KSU. Although important I don’t see any reports that are likely to be big market movers today.
Action Plan
Yesterday we as we DIA product a couple of whipsaws that for a short period looked like the Bears were grabbing control. The Bulls went to work defending prices and closing the SPY, IWM, and the QQQ’s at new record highs for the first ten-day winning streak since 2015. As good as is was to see the Bulls step-up and defend we left behind a hanging man pattern on SPY and QQQ. The pattern is a warning that the Bulls could be running out of fire power but as with many candle patterns, it does require follow-through. However, it does warrant raising caution levels.
Futures were lower during the night, and currently, they are suggesting a slightly lower open. After 10-days up it’s not a surprise that some profit taking ahead of the weekend is likely. The MSFT report was positive on both the top and bottom line, and the stock is currently indication a higher open. Of course, there is always a chance the price could fall below our short strike at $72.50, but we should expect exercise. All that means is that we got paid to sell our position at a much higher price. I will be much more focused on profit taking than new entries today.
Trade Wisely,
Doug
Bullishness or Irrational Exuberance?
There is a very thin line between a bullish market and irrational exuberance. After the 9th day of rallying straight up, I’m not predicting irrational bullish behavior, but it would be foolish to think this kind of price action will continue forever. Good earnings reports could continue to encourage buyers to pile on, and exuberance can continue much longer than anyone would expect. So what is a responsible trader to do? Trade with a plan! It is only with a plan and the discipline to follow it that you can avoid predicting and emotional trading. HRC and RWO have proved over and over that planning makes the difference in profiting consistently. If you’re not planning I have to ask, What are you waiting for, an engraved invitation?
On the Calendar
The Thursday Economic Calendar begins with the Weekly Jobless Claims and the Philadelphia Fed Business Outlook Survey at 8:30 AM Eastern. Labor demand remains very strong, and forecasters see jobless claims falling by 1000 to 246K last week. Growth in the factory sector has been exceptional in the Philadelphia Fed index. The index came in at 27.6 in June with the July consensus at 22.0. Order readings are at extraordinary levels and points to an overheating at least in the Philly sample. Leading indicators are at 10:00 AM, and after that, there is a pile of bill and note announcements.
Today is the first big day of the 3rd quarter Earnings Calendar with 128 companies expected to report today. Some of the notable reports would be EBAY, MSFT, KEY, and V. Make sure you are checking current holdings and potential new trades for earnings dates as part of your daily planning.
Action Plan
The Bulls showed some incredible strength yesterday stampeding higher with no fear. The SPY was the strongest of the indexes with buying right into the close and yet another all time record high. Bullish buyers even lifted the IWM which has lagged behind the rest of the market to new all time record highs. With the 9th straight day of gains, even the QQQ’s managed a new record high close having sliced through multiple layers of price resistance as if they were never there.
To me, the overall market seems to be displaying irrational bullishness. That can continue as buyers continue to pile in feeling as if they are missing out. However blind bullishness can also create some very nasty reversals. Make sure you are protecting your profits and have a plan on every trade in case the market suddenly turns. I will likely be more focused on taking profits today and tomorrow than looking for new trades in an over extended rally. Having said that there are so many great looking charts setting up. If earnings continue to attract buyers, it is entirely possible this rally can extend even more but if you do trade make sure you entering low-risk trades rather than chasing trades already will within their run higher.
Trade Wisely,
Doug
The Bulls showed strength defending the rally.
At the market, I was concerned that the Bears were taking over, but the Bulls showed strength, stepping up and defending the rally. The SPY and the QQQ’s displayed remarkable strength continuing to move up into the close. Currently, the bull run is getting a little over baked with eight days up, however, if earnings reports continue to provide the market confidence that can continue. If we stay objective setting aside personal biases and simply focus on price action, we can identify and follow the directional clues. Follow don’t predict!
On the Calendar
The hump day Economic Calendar begins with Housing Starts at 8:30 AM. Last week the housing starts and permits were noticeably weak last month coming in just over a 1 million annualized rate. Forecasters are expecting a big rebound this month bringing the annualized number up to a rate of 1.170. At 10:30 we have the EIA Petroleum Status Report that has become heavily watched by traders the last couple years. Inventories have been falling for several months now, and we need that to continue to stabilize oil pricing. If we happen to get an increase in supply, we can expect an overall negative reaction by the market.
On the Earnings Calendar, we have 81 companies reporting earnings today. There are few companies that report before the bell, but the biggest reports will be after the close today with the likes of AXP and QCOM. Stay on your toes as we ramp up and make sure you check when companies report or suffer the consequences.
Action Plan
After a quick morning plunge, the Bulls went back to work showing they want to defend support levels. The DIA has the most dramatic move of the day leaving behind a Hammer pattern above price support. Keep in mind a Hammer requires follow-through. The SPY managed to squeak out yet another record closing high on its end of day bullish push while IWM remained under price resistance. The continued strength in the QQQ’s was nice however the rally is nine days old, and a pullback or consolidation could begin at any time.
Futures are currently suggesting a slightly lower open, but there are still some big reports to come, so anything is possible. We have some fantastic gains in our RWO trades, so the first order of business will be to manage these positions. I will be looking for new positions today, but once again I will likely give the market 15 to 30 minutes focusing on the price action before making any decisions.
Trade Wisely,
Doug
Slow yet constructive price action.
The market was a bit slow yesterday, but I saw as very constructive price action. While it’s true the indexes chopped in a rather small range yesterday, it seemed only to be resting after the rally. Perhaps both the Bulls and Bears are just pausing ahead of big earnings reports to give them some directional inspiration. Whatever the case may be, it is our job as traders, to maintain discipline. Avoid the emotional drama of the season. Focus on the price action react by following it rather than trying to predict it.
On the Calendar
Tuesdays Economic Calendar has three importing reports, but they are unlikely to move the market unless they come in with a big surprise. At 8:30 AM Eastern we have Import Export Prices. Follow by the Housing Market Index and Treasury International Capital at 10:00 AM and 4:00 PM respectively. Import Export number is expected to decline by 0.2% in largely on the back of low energy prices. The future housing sales expectations are expected to remain strong. Forecasters see it ticking higher this month from 67 to 68 on the Housing Market Index. The Treasury International Capital number tracks foreign demand for Long-Term Us securities. It normally fluctuates with the strength of the U.S Dollar.
On the Earnings Calendar, we have 45 companies reporting today. Noteworthy reports will form GS, BAC, JNJ, and PGR before the market opens. IBM which has been under a lot of selling pressure since Buffett lost confidence in the company reports after the bell today.
Action Plan
Although yesterday was a pretty slow day with the market taking a bit of rest, it was still very constructive day. Price action was somewhat choppy, but Bulls maintained their position of control. The QQQ’s is the only index showing stress leaving behind a Shooting Star Pattern right a price resistance. IWM once again threatened a breakout pushing hard against resistance, but once again it proved to be too strong preventing a breakout.
As I write this, futures are slightly higher, but the direction of the market will be directly impacted by big earnings reports this morning. The truth is anything is possible, so it’s important to remain flexible and set aside personal biases. Don’t predict just follow the price action as it presents itself. There are a lot of good charts showing bullish setups this morning. However, I want to avoid the drama of the open and will likely allow 15 to 30 minutes of price action to occur before making any new trade decisions today.
Trade Wisely,
Doug
The Bulls chalk up two more record highs.
Last Friday a stampede of Bulls managed two more record highs to add their impressive collection of records this year. As great as that is, please keep in mind both the DIA and the SPY must still prove that the broken resistance will serve as support if tested. I suspect as 3rd quarter earnings ramp up there will more volatility in price action ahead, both bullish and bearish. With the VIX only pennies away from new record lows it would be wise to remember very fast price reversals are not out of the question. Every trade needs a plan that includes exit strategy before entering new positions.
On the Calendar
Other than some bond settlements. Announcements and auctions there is only one report of significance on the Economic Calendar today. The Empire State Mfg Survey comes out at 8:30 AM Eastern Time. Last month the number came in very strong with a reading of 19.8 indicating confidence in manufacturing growth for the next six months. Forecaster saw this was an anomaly and expect the number to come in around 15.0 for July, which is still very strong.
There are 24 companies reporting today with the biggest name being YHOO coming after the bell. With the recent weakness in the NASDAQ, I would expect the YHOO report heavily focused on by the market. It could be an interesting one to watch at the end of the day. Please make sure you are checking earnings report date on everything you own and everything you buy as part of your trade planning.
Action Plan
Friday was a very good day for the Bulls. Not only did they manage to push the DIA into new record high territory but managed to break resistance on the SPY setting yet another record. The IWM tested resistance but shrank away from it before the close, and the QQQ’s managed it’s 6th day up to challenge resistance levels.
Currently, futures are pointing to a higher to a slightly open this morning. It would be nice to see the market continue on the bull run but after such a strong day on Friday, a rest or slight pullback would not be out of the question as well. With that in mind, I will be looking for new long trades today. However, I will likely give the market about 30 minutes after the open before making any decisions. Of course, as always, the first order of business will be to manage current positions.
Trade Wisely,
Doug
Third Quarter Earnings craziness begins today!
With the beginning of the third quarter earnings today I’m hopeful we will finally shake lose from the choppy range bound price action of late. Please, please make a habit of checking current holdings and possible new trades for earnings reports. Getting caught by surprise is not acceptable for professional traders. I think this round of earnings will be very important. We have had an amazingly bullish market since the presidential election. It will now be up to the companies to prove with their results that current high prices of the market are justified by earnings results. Stay on your toes there are likely volatile days ahead.
On the Calendar
We kick off the Calendar with big reports this Friday morning. First the Consumer Price Index at 8:30 AM Eastern followed immediately by the Retail Sales report. Shortly after at 9:15 is the Industrial Production report. We have a Fed Speaker at 9:30 than the less important Business Inventories and Consumer Sentiment report. Consensus expects a 0.1% gain in the CPI, Retail Sales a weak 0.1% gain and a solid showing in Industrial Production of 0.2% increase. The Business Inventories are expected to grow 0.3% while Consumer Sentiment should remain but strong but decline slightly.
We get a running start on the 3rd quarter Earnings Calendar today with reports from C and JPM before the bell. How the big bank’s report will likely have a major effect on how the market open today. Over all, there are 14 companies reporting earnings today.
Action Plan
Yesterday price action was just what the doctor ordered with the Bulls stepping up to the plate and following through on Wednesday’s strong performance. Although the price action was bullish, the SPY, IWM and QQQ’s continue to overhead resistance yet to deal with so don’t sound the All Clear signal just yet.
With so much big data coming out before the market opening today anything is possible, so we will have to think on our feet. Currently, the futures are flat as the market waits for the deluge of news. As a result, I will need to remain flexible and closely focus on the price action at the open before making decisions on new positions. Of course, the first order of business is to manage current positions. Friday, as you know, is normally the day I look to bank some profits rather than entering new trades. However, with the overall market showing signs of shaking off the range bound chop, I will not rule out new trades today.
Trade Wisely,
Doug
The current rally has been amazing with new records for the books almost every day on this earnings fueled rally. Hey, who doesn’t love market rally? Right! Profits are easier to make, and the world of the trader just seems to be filled with sunshine and rainbows. It’s often times like this when traders get complacent. Breaking the rules, rushing trades and/or over trading. If we fail to plan carefully, we invite emotion into our trading which normally ends badly. Maintain your discipline, be prepared and protect your capital from emotional decisions with a well thought out plan.
