Whippy price action increases risk.

The whippy price we have been experiencing is pretty typical as a market struggles with new highs.  However, it’s that same whippy price action that chops up traders and increases the risk on every trade they make.  We never know how long a period like this will last.  It’s the wise trader that recognizes the additional risk and curtails their trading activity and decreases the size of trades during higher risk periods.  It’s so easy to lose hard earned profits fighting volatile price action.  Always remember Cash is a position.

On the Calendar

There is no question that this has been a big week on the Economic Calendar.  Today we get a little break with only three noteworthy items.  First, we will get the Housing Starts number at 8:30 AM Eastern.  The April number was a disappointment. However, forecasters see them bouncing back in May to a 1.2 million annualized rate.  At 10:00 AM we the latest reading on Consumer Sentiment which has been trading very strongly this year.   The consensus is suggesting that will continue with a 97.1 print.

After only a brief break we will once again start seeing the Fed speakers back on the news tour.  Today we have one speaker at 12:45.  The Earnings Calendar is also giving us a break today with only one company expected to report.  The company ticker is UTSI, and they have not confirmed the time of the report.

Action Plan

Yesterday we experienced yet another major whipsaw as the market try to decipher what to do at these highs.  For the last ten days, the Spy has chopped in a range of just over 2 points and often visiting both sides of the range each day!  The DIA has seen big point swings every day yet has managed to maintain an uptrend in the process.  Needless to say, it has become a very challenging market for swing traders due to the volatility.  I would like to say it’s over, but there is no reason to believe that today won’t be more of the same so again I’m suggesting caution.

Overall the trend is still bullish thus I will continue looking for long positions, but if I find good trades, I will reduce the trade size until I see extreme whips come to and end.  To successfully trade whippy market stops have to widen to avoid intraday whips from constantly tripping stops.  So, in conclusion, I suggest trading small if you decide to trade at all.

Trade Wisely,

Doug

Volatile Price Action raises questions of a top.

The volatile price action yesterday makes me question if we are truly experiencing a topping pattern under construction.  If so it can be a very dangerous time to trade.  Tops will normally display a lot of false price reversals and nasty intraday whipsaws.  It may be time to reduce trading activity, so we don’t get chopped up in the volatility.  If you have not already considering raising cash in your account it may now be the time.  Always remember that Cash is a position.

On the Calendar

We kick off this Thursday on the Economic Calendar with Jobless Claims at 8:30 AM Eastern.  Claims have been very low, and the forecasters expect them to continue to move lower today.  Also at 8:30 is Philly Fed Business Survey which has been exceptionally well.  Backlog orders have been rising month over month but the expectation for today is for a very slight pullback in the number.   We still have two less important number at 8:30, Empire State MFG as well as the Import and Export prices.

At 9:45 is the Industrial Production number where the consensus is suggesting a 0.2% gain to 76.8% which is very strong.  We have a Housing Market Index report at 10:00 AM and the Treasury International Capital at 4:00 PM, but both are unlikely to move the market unless they come in with a big surprise.

Action Plan

Looking at the futures this morning, I am very happy to have been cautiously sitting on the sideline yesterday.  If you were there with me, then you are also enjoying the relief of know that your capital is safe while the market goes through its gyrations.  The whipsaw after the Fed numbers was a nasty one and I wouldn’t want to rule out the possibility of more today.

I would expect a lot of fast moving price action this morning.  If the Bears really take control, we could see some panic of a top move into the market.  However, if the Bulls continue to fight back as hard as they have been doing lately, then we could easily see a full reversal back up.  Unfortunately, unless you are an experienced day-trader, it would best just to stand aside and protect your money.  I plan to continue being very cautious and don’t expect I will be adding any new risk this morning.

Trade Wisely,

Doug

No fear ahead of today’s huge data dump.

The bulls show no fear at all as we head toward the FOMC announcement and calendar full of big reports.  I would not be at all surprised to see choppy price action today.  Swift whipsaw moves are not at all out of the question as with all the data the market will have to chew through.  With the VIX close to testing historical lows once again it would be wise to remember how quickly no fear can shift to panic.  I plan to do a lot of watching from the sidelines today.

On the Calendar

Today the Economic Calendar is a doozy.  It kicks off with two very big reports at 8:30 AM Eastern, Consumer Price Index and Retail Sales.  Consensus estimates expect the CPI to come in on par with last month’s number of 0.2%.  Retail Sales is also expected to come in relatively flat with only 0.1% growth, as consumer spending remains weak.  At 10:00 we a reading on Business Inventories which is expected to stay very low at 0.1%.  The all important EIA Petroleum Status number comes out at 10:30.

At 2:00 PM we will finally get the FOMC Announcement on interest rates followed by the Fed Chair Press Conference at 2:30.  On the Earnings Calendar, there are 30 companies reporting today so make sure to keep checking.

Action Plan

The market remains tenaciously bullish with the Dow making new all time highs and the SP-500 carving out a new all-time closing high.  The VIX is once again pushing lower and may again test all-time low levels of fear.  Even though the overall market keeps marching higher, it has become increasingly challenging to make money.  The whippy price and surprisingly sharp drawdowns test even the most experienced traders.

With this huge data dump today I plan to move very slowly watching price action closely.  I expect to see very choppy price action this morning, and potentially swift whipsaw moves as the market digests all the data.  Personally, I won’t rule out adding new positions, but I will most likely just enjoy the show from the sidelines.  I have had a fantastic year so far, and I see no need to charge head first into danger.  My method is to be more like a sniper, waiting quietly for the shot picture to clear before pulling the trigger.

Trade Wisely,

Doug

Price action is decisive but support holds.

It was encouraging to see positive price action and the DIA, SPY, and IWM holding price supports.  Even the technically damaged QQQ managed to stave off additional selling.  Price action, however, proved to be very two-sided and whippy.  As a result, the markets left behind indecisive patterns that will keep me on the side of caution.  The market faces a massive data dump tomorrow as well as a rate decision from the FOMC.   Don’t be surprised if we continue to see choppy price action and indecisiveness today.

On the Calendar

Today begins the FOMC meeting that culminates tomorrow afternoon with their decision on interest rates and Yellen’s Press Conference.  Also on the calendar today it’s the Producer Price Index (PPI) at 8:30 AM Eastern and a Fed speaker at 1:45 PM.  PPI rebounded slightly in April, but services remained weak pointing to a concern of demand weakness.  Consensus sees the number increasing by 0.1% with food and energy at 0.2%.

On the Earnings Calendar, we have 32 companies reporting today.  I don’t see any potential market moving earnings reports, but it is always wise to check your holdings and new purchases for reporting dates.

Action Plan

With the FOMC rate decision looming I think could see a lot of chop and whippy price action as we wait.  Odds of a rate increase are running in high 90’s percentile.  As of right now, the overall market seems to be taking the likely rate increase in stride showing fell ill effects.  The four major indexes held up better than I would have expected after Fridays surprise tech sector selloff.

Futures are currently pointing to a slightly bullish open and except for the technical damage in the QQQ overall the market remains bullish.  However, there is a huge wave of data coming at on Wednesday, and I feel the need to remain quite cautious when considering new risk.  I will not rule out adding new positions today but keep them smaller than normal, and I will need to see the Bulls showing better commitment overall.  Choppy anemic price action just won’t get it done.

Trade Wisely,

Doug

Friday’s whipsaw has caution flags flying high.

The Friday afternoon whipsaw was simply Nasty!  It left traders counting up losses on stopped out trades where just a couple hours earlier they had been looking at gains.  It also quickly spiked fear and once gain reminded us how dangerous complacency becomes at or near market highs.  At a minimum, Friday was a warning that we must always be at the top of our game and a “safe” market does not exist.  As for me, I will be approaching today’s market with extreme caution and a very watchful eye on price action.  Was this a one-off event or a warning of trouble ahead?  Only time will tell.

On the Calendar

The Economic Calendar begins with a whimper today but will roar like a lion by mid-week when the FOMC comes front and center.  Today, however, we only have a few bond auctions and the Treasury Budget that comes out at 2:00 PM Eastern.  Although it should be shocking that May is expected to produce an 87.0 billion dollar Federal deficit, it will pass without notice.  In truth 87.0 billion is a slight improvement over last years numbers.

On the Earnings Calendar only ten companies reporting earnings today none of which are overall market movers.  Always remember to check earnings on each and every stock you hold and are thinking about purchasing.  There is no excuse for being surprised by an earnings report.

Action Plan

Friday’s wild price action ride amounted to a very nasty whipsaw.  I ended up closing a couple of positions in response to preserve some small gains.  Caution lights began flashing all over the place as I looked through charts and that caution remains this morning.  Futures are currently pointing to a slight gap down open today but what we will have to pay very close attention to is how traders react after the open.

The VIX after hitting a new low record low Friday morning rather suddenly shot up 28% but settled up only 14% by the close.  That kind of volatility is difficult even the most experienced traders.  As a result, I am suggesting that new or struggling traders should stand aside, watch and wait.  Price action like this could turn out to be nothing, or it could be a warning of turmoil ahead.  I will manage my current positions, but I will be waiting for good price action clues before even considering new risk.

Trade Wisely,

Doug

Shooting stars and doji’s abound.

As I looked through the charts last night, I saw a lot of shooting stars and Doji’s at highs which are considered bearish.  I also saw a lot of indecisive doji’s at highs and in consolidations.  Both of these conditions would warrant significant caution. However, there was also a lot of very bullish patterns and some fantastic looking charts.  What’s a guy to do?  Yesterday was a very emotional day for the market due to the congressional hearings.  There were several full reversal whipsaws during the day making charts very convoluted.  As of now I’m staying bullish on the overall market and may even consider adding some risk ahead of the weekend, but I will give the market a good 30 minutes to an hour to settle in before making any decisions.

On the Calendar

A very light Friday on the Economic Calendar with only a couple reports with little to no significance.  On the Earnings Calendar, it’s much the same with only eight companies reporting.  None of which should be market moving.  Truly the quiet before the storm, because next week we have one of the fullest calendars of market moving reports I’ve seen in a long time.  Of course, the biggest is the FOMC decision on interest rates.

Our news filled day yesterday turned out to be a non-event the U.K. elections could create some turmoil abroad and is worth noting.  Long story short, the Prime Minister lost so may key seats it would normally force her resignation.  However, she is refusing to resign and will now seek the approval of the Queen to form a government.  Let the drama begin!

Action Plan

As you know Friday is normally my day to take some profits and a day I usually restrict myself from adding new positions.  However, with the decks, somewhat cleared for the President to proceed with his plans; And the house passing the bill that removes much of the Dodd-Frank debacle I’m thinking of adding risk.  The big banks began a rally yesterday, and I would expect that to continue today.  Futures have the chances of that the FOMC will raise interest rates next week above 95% which should help the banks even more.  Hince, I will be looking for an entry in the financial sector.  Stay tuned.

Trade Wisely,

Doug

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