Back in the Saddle

Good morning friends.  It’s good to be back in the saddle.  Las Vegas is always fun and meeting with fellow traders at the Expo is a blast.  However, as Dorthy says in Wizard to Oz, “There is no place like home.”

The Bulls remain in control, and the overall trends are still very bullish.  I will continue trading long, and with the overall trend, however, I think it would be wise to stay laser-focused on price action.  As strong as this bull run is we don’t want to become complacent.  One method to combat complacency is taking profits consistently into market strength.  Doing so will relieve the pressure on a winning trade.  There is nothing like taking profits to the bank to remove the emotions of fear and greed.

On the Calendar

There are several items on the Economic Calendar such as bond auctions but nothing that is expected to move the market.  At 12:10 PM there is a Fed Speaker to be aware of but again unlikely to move the market.

On the Earnings Calendar, there are just over 200 companies expected to report today.  As the last really big week for this earnings season we and expect about 1500 reports so stay on your toes for another wild week.

Action Plan

With the DIA, SPY, and QQQ all setting new closing records on Friday the trend higher is still absolutely intact and bullish at this time.  The poor IWM just can’t seem to get with the program join in with the rally.  As of now it continues to consolidate and would have to be considered the weakest of the indexes even though sellers have been unable to take control.

Futures this morning are mixed as I write this, but of course, with so many pre-market earnings reports anything is possible.  The bullishness of this rally has been remarkable, and I know many traders think these prices are unsustainable.  While I agree this bullishness seems irrational, it would be unwise to anticipate a market correction.  If you take a look at the tech bubble of the late 90’s you can see that irrational market behavior can last several years.  Please understand I am not suggesting this rally will last for years, I’m simply pointing out it has happened before.  Stay with the trend until the trend ends.

Trade Wisely,

Doug

Do you have an edge?

Will we get the typical pre-FOMC choppy price action or will the 380 earnings reports break the mold?  Perhaps the bigger question is, Do you have an edge?  On the positive side, the market is trending higher, and so far earnings have been overall strong.  On the other side, the market appears overextended, and the uncertainty of earnings reports and FOMC looms.

During times like this, I normally slow my trading activity.  I try to focus on my current portfolio first.  I tend to slow to add trades during times of uncertainty.  I’m only interested in low-risk entries to keep potential losses as small as possible.  I try not to chase the morning pops and drops.  I choose instead to wait 15 to 30 minutes before looking for new risk.  Always remember quality is more important than quantity and prepare for anything.

On the Calendar

On the Economic Calendar, this last day of October begins the FOMC 2-day meeting kicks off.  Their announcement regarding interest rates will occur tomorrow at 2:00 PM Eastern.   At 8:30 AM today we have the Employment Cost Index is expected to surge 0.7% today.  The 9:00 AM reading of the S&P CoreLogic Case-Shiller which is expected to rise 0.6% bringing the year-on-year rate up to 6.0%.  Then at 9:45 AM the Chicago PMI is expected to slow just slightly to 62.0 according to forecasters, which is still very strong.  The 10:00 AM Consumer Confidence is seen rising to 121.0 vs. September’s 119.8 print.

The Earnings Calendar ramps up today with more than 260 reports.  We had better get used to it because the number grows to more than 380 on Wed. and over 600 on Thursday.  Prepare, prepare, prepare.

Action Plan

Political turmoil, earnings, and FOMC.  Oh, My!  With so much on the proverbal market plate, the next few days the uncertainty alone is likely to give traders indigestion.  There are a lot of good charts, but because of all the news and the potential violent reactions can you still find an Edge?  Tough call.

The good news is that the market is still wildly bullish even considering yesterdays little pullback.  If earnings continue to come out positive, then there is every reason to believe that the market will continue its trend.  Futures are pointing to a bullish open, however, keep in mind that normally we get choppy price action as the market waits on the FOMC.  The problem is, I’m not sure normal applies here!  Anything is possible so plan accordingly.

Trade Wisely,

Doug

Remain Objective

With such a strong bull run underway it can be difficult to remain objective.  There are those with a wildly bullish market bias and those expecting an imminent collapse as a result of the being overbought.  The financial news only serves to fan the flames of both sides of this drama.  Toss in turbulent government and about 1500 earnings reports and you have the makings for a very wild week.  So whats a trader to do?

What works for me is to turn off all the noise, focus on price action, my trading rules, goals and discipline.  Price is King.  I can only make money if I’m on the right side a price move.  What I think or feel should happen is completely irrelevant and only clouds my view of actual price action.  Turn off the noise, set your bias aside and trade the chart.

On the Calendar

The Economic Calendar begins with a potential market-moving report at 8:30 AM Eastern.  The Personal Income and Outlays core number is expected to rise by only 0.1% September with the year over year rate stuck at 1.3%.  However, personal income is expecting an increase of 0.4%, and consumer spending is expected to jump 0.9% as a result of post-hurricane auto replacements.  At 10:30 AM is the Dalla Fed Mfg. Survey is not expected to move the market with a strong number of 21.3 according to forecasters.

The Earnings Calendar will be front and center this week with more than 1500 companies reporting.  Today we get it kicked off with just over 180 posting results.  I highly recommend taking the time to make sure of the reporting dates of companies you hold or those you are considering as new purchases.

Action Plan

Last week ended with a bang due to some great big tech earnings reports.  Both the SPY and the QQQ closed at new record highs while DIA and IWM lagged slightly behind.  Currently, futures are pointing to lower open as I write this but with so many earnings reports coming out that could easily change.  There is widespread speculation today of possible arrests from the Russian investigations.  That, of course, could temper the bulls enthusiasm as it could slow or even stop the tax plan.

As for me, I will stay the course, trading with the trend which is bullish but extended.  With such a huge number of companies reporting this week anything is possible.  Don’t be surprised to volatile moves up or down as the market reacts to earnings as well as the news.  Fast intraday whips are not out of the question so avoid chasing and wait for low-risk defensible positions.  My suggestion is to turn off the news, avoid the drama and stay focused on the price the action.

Trade wisely,

Doug

Maintain an Edge.

My knowledge of technical analysis and reading price action is what gives me an edge in the market.  To make a living as a full-time trader, I have to recognize when I have an edge and when I don’t if I want to make consistent profits.  We all know that individual earnings are unpredictable.  When we get them in groups of 500, they can easily swing the entire market before the open or after it closes.  That means to trade today I have to be willing to give up my edge, toss caution to the wind and embrace gambling.  I choose to maintain an edge!

I’m very light in my accounts and don’t expect to add new risk today.  With so many unpredictable earnings reports I have to forfeit my technical analysis edge to trade today.  Gambling has never been a winning strategy for me.  When my edge is gone, I prefer to stand on the sideline watching the battle and protecting my capital.  Buckle up friends; it could be a bumpy ride!

On the Calendar

One hour before the market opens the Economic Calendar get the day going with International Trade and the weekly Jobless Claims reports.  International trade is expected to widen the deficit in September with a consensus reading of $63.9 vs. $63.3 billion.  Also at 8:30 AM Eastern the weekly Jobless claims were expecting 235K only slightly higher than the 222K last week.  At 10:00 AM Pending Home Sales number is expected to rise 0.4% after last months 2.6% drop due to hurricane impacts.  There is a Fed Speaker at 10:30 AM as well as a few lessor reports and bond auctions.

Today is a huge day on the Earnings Calendar with more than 500 companies expected to fess up to last quarters results.  There are a lot of potential market-moving reports today with the likes of GOOG, MSFT, INTC, WDC, WYNN, AAL, BMY, COP, MO just to name a few.

Action Plan

Yesterdays light sell-off is being met this morning with futures are currently pointing to a slight bounce back at the open.  With so many companies reporting the bulls and bears will have a lot to fight about in the next 2 hours before the market opens.  Anything is possible.  Then after the market close will some really big hitters report, so no matter what happens during the day, it could all change in the after-hours session.

Trade Wisley,

Doug

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