Bullish price action warrants cautious optimism at resistance.

The bullish price action and the strong close lifted my optimism of a breakout yesterday afternoon.  Because I am long 12 positions, I obviously have an upside bias, but I must acknowledge the overhead resistance.  Even with the great effort, the Bulls made yesterday resistance still proved to be a stumbling point.  I’m holding out hope that today will be the breakout but I am prepared to capture my gains quickly if resistance proves too strong.

On the Calendar

The Earnings Calendar kicked off early this morning with HD reporting better than expected earnings about 6 AM Eastern time.   Let’s hope the 70 plus other companies do as well and it’s enough energy to break the market out of the current price range.   For now, I will cheer for HD because the DIA needs all the help it can get!

On the Economic Calendar, we have two potentially market-moving reports.  First, off is the Housing Starts number at 8:30 AM Eastern followed by Industrial Production.  Both are important numbers because they directly point to the health of our overall economy.  Growth in both areas would sure help to lift the market out of its recent doldrums.

Action Plan

I am approaching the market with cautious optimism.  The nice showing in the SPY yesterday and its strength into the close inspires the optimism.  The caution comes in the form of resistance that as of yesterday proved to an obstacle the market was unable to overcome.  As a result, I’m happy to be holding a significant number of long positions yet feel the need to manage them closely.  If a failure price pattern were to occur this would be the place to watch for them.  Currently, futures are pointing to a slightly positive open, but a lot can happen over the next couple hours as the market responds to earnings and market reports.  My plan is to stay long, but I will be laser focused on the markets price action and will not hesitate to capture gains if a failure pattern develops.

Trade wisely,

Doug

Consolidation enters week #4 as choppy price action continues.

The long the consolidation lasts the bigger the pressure becomes and the possibility of a big fast move.  If the move happens to occur in the overnight or pre-market sessions, a trader can themselves trapped in bad positions.  Although I will continue to trade, I will limit the number and size of the trades as a method of controlling risk.  Discipline to stick to a plan can be difficult to matain during long consolidations.  However, the trader that breaks discipline may quickly find themselves on the wrong side of price when the break occurs.  Please be careful!

On the Calendar

We kick off a this Monday with the Empire State MFG Survey at 8:30 AM Eastern time follow by the Housing Market Index 10:00 AM.   Later today at 4 PM the Treasury International Capital numbers will be released.  These are all important reports, but it’s unlikely they will move the market unless they happen to issue a very big surprise.  I know you will all be shocked, but there are no Fed speakers today on the calendar!  On the Earnings Calendar, we have just over 240 companies reporting today in what looks to be the last mass reporting days this quarter.

Action Plan

As the market remains in a choppy consolidation at resistance, we must remain cautious and flexible and focused.  Cautious, because of the pressure that is building for a big move and no one knows which way.  Flexible, due to the fact we may be required to reverse our trading plans very quickly when a breakout or breakdown occurs.  Focused on price action even though it’s easy to become bored and complacent during a long period of chop.

Futures are pointing to a higher open today, but it would seem we still lack the energy to break out.  Manage the positions you’re in and move slowly to enter new long trades as we bang away at the door of resistance.  Now is the time to be very picky a to cut positions sizes if you do decide to enter new trades.

Trade Wisely,

Doug

Choppy price action continues.  Will the consumer break the tie?

Choppy price action is very difficult for all traders to manage.  This week I have been warning of the dangers of being overly long the market when resistance has been so difficult to breach.  So far we have been lucky that the Bulls and Bears have remained equally matched.  The tie breaker could be today when we get a read on the strength of the consumer.  I think it would be wise to prepare plans for both a break of resistance and support.  Because we have been in such a tight range for so long, pressure continues to build and price move on any break could be substantial.  Be prepared!

On the Calendar

Today on the Economic Calendar we have the Consumer Price Index and Retail Sales reports at 8:30 AM Eastern time.  I think both of these numbers will be of utmost importance and will likely set the direction for the market.  At 10:00 AM we get a reading on Business Inventories and Consumer Sentiment.  So far every single day this week there have been Fed speakers and Friday will be no different with three speakers.  On the Economic Calendar, there are only 60 companies reporting, but that is not an excuse to stop checking.  It only takes one report like SNAP to destroy a traders progress.  Always find out when a company reports and have a plan to protect your capital.

Action Plan

I need to be a flexible this morning and have a couple of plans prepared.   I”m think today will hinge on the strength of the consumer.  With the overall market chopping sideways at resistance the Retail Sales numbers could easily be the deciding factor on direction.  As a result to be prepared with a couple of plans.

If the numbers are really good and the market reacts positively, I want to prepare for a potential upside breakout.  If this occurs will want to hang on to existing positions and even look for new trades that are set up.  Toward the end of the day, I will have to make decisions on individual positions; take profits, or hold through the weekend.

If the numbers show weakness in the consumer, the market will likely react negatively.  With price support so close it could easily give way allowing the market to tumble lower.  In that event, I want to be ready and willing to close profitable positions and protect capital on trades losing money.  Obviously, a negative close below support could lead to more selling early next week.  Consequently, I would want to go into the weekend with less exposure to the market.

Trade Wisely,

Doug

The Bull’s showed resilience defending price support.

Defending price support with the Bears on the attack was important yesterday but price resistance continues to pose a problem.  I have to admit that the Bulls displayed much more resilience than I was expecting.  Great job Bulls!  As a result, I want to be very bullish, but the fact remains that both the DIA and the SPY remain in a sideways consolidation.  Don’t get me wrong I’m very grateful the Bulls defended the borders but they still seem to lack the energy to breakout.  Futures are suggesting the Bears may be trying to regroup to mount another offensive this morning.  Can the Bulls continue to hold?

On the Calendar

The Economic Calendar kicked off early today with a Fed speaker at 6:25 AM Eastern.  The good news is that’s the only Fed member with something to say today!   Is it just me, or does anyone else miss the days when the Fed was a lot more tight lipped?  LOL.  The weekly Jobless Claims numbers are a 8:30 AM as is the biggest number of the day Producer Price Index.  On the earnings front, we will receive reports from over 300 companies today.  The earnings calendar finally begins to lighten up next week and slowly wind down this quarter’s reports.

Action Plan

If the Bulls continue to show resilience defending support as well as they did yesterday, we will be in good shape.  However, the Bears are attacking again this morning with the futures pointing to a lower open.  Currently, hold 13 long positions I think is necessary to exercise a little caution on entering new trades.  At the close of yesterday, all 13 positions were winners, so my top priority will be managing current trades and possibly taking some profits.

With the majority of the open positions being tech related I will keep a close eye on the QQQ.   If there is a weakness there, I will be more inclined to start banking gains and reduce risk.  I suggest everyone tighten up your stops.  Remember trades can happen much faster than it’s possible to send out alerts.  If you’re happy with the gain, take it.  You can never go broke taking a profit!

Trade Wisely,

Doug

Bearish engulfing price action at resistance.  Bears gain the advantage.

The bearish engulfing candles left behind yesterday on the DIA and SPY put the Bears in temporary control of market direction.  The fact that they took control right a price resistance is also very important as well as concerning.  Clearly daily supports are still in place, but we should expect at a minimum a strong challenge.  There is no need to panic but caution flags and warning lights are flashing.  This bearish attack could be short lived but it could also be the first warning sign that this bull run has come to and end.  The Bulls will certainly fight back but we should never ignore the seriousness of a potential failure at resistance.  Plan accordingly.

On the Calendar

The Economic Calendar starts to heat up today with some important reports through weeks end.  Import and Export Prices kick things off at 8:30 AM Eastern time followed by the Petroleum Status Report at 10:30 AM.  This afternoon at 2 PM the Treasury Budget will be released.  Of these reports, the most likely to move the market is the Oil Status Report.  Also noteworthy are the two mid-day Fed speakers.  The Earnings Calendar has over 350 companies reporting today.

Action Plan

The last couple days I have been warning about the dangers of getting overly long a market that’s struggling to break resistance.  Yesterday afternoon the Bears began to overwhelm the Bulls breaking intraday support levels.  This morning the Bears continue their offensive with futures number suggesting the Dow will gap down about 50 points.

Watch your positions closely this morning and be prepared to take profit or exit trades to stop losses if necessary.  The SPY and the QQQ seem to be less affected, but if the DIA continues to push lower, it certainly has the power to pull the other indexes down.  So at least for this morning, the plan will be account management, possible profit taking, and capital preservation.  Keep in mind that daily supports are still in place, so there is no reason to panic, but we also don’t want to bury our heads in the sand.  Always be prepared to act.

Trade wisely,

Doug

The market is pounding on the price resistance door.  Will it open?

With the DIA and SPY pounding on the price resistance door we are left with a question.  Do the Bull have the energy to push it open?  The QQQ has certainly been doing its part resuming market leadership capturing new highs.  Still, the broad market seems lethargic and uninspired.  Futures are currently pointing to a higher open though not enough just yet to overwhelm the Bears.  Perhaps as the morning rolls along, the huge number of earnings reports will provide the spark necessary to break through.

The longer the Bulls pound against the door unable to open it the Bears will become emboldened.  Keep an eye out for clues of failure if this level of resistance proves too difficult for the Bulls to breach.  As of now, I’m sticking with Team Bulls, but I’m prepared to switch sides quickly if the momentum shifts.

On the Calendar

Another light day on the Economic Calendar has the JOLTS report at 10 AM Eastern and 3 Fed speakers.  To move the market the JOLTS number which tracks monthly job openings would require a huge surprise.  No likely!  Of course, the Fed speakers always have a chance of moving the market if they interject an unexpected comment on rates.  Over 400 companies report earnings today with NVDA being one of the most watched.  NVDA number will not be out until after the bell this afternoon.

Action Plan

After a disappointing start yesterday the Bulls managed to stage a small choppy rally.  The DIA and SPY closed just slightly bullish, the IWM recovered from early lows, but the QQQ stretched out to a new all-time closing high.  Although bullish, both the SPY and the DIA remain under price resistance.  Both need a burst of energy to break through to new highs.  However, this also the area we have to watch for clues of failure if the Bears gain an advantage.

Counting both stock and options positions, I’m currently holding ten open swing trades.  Considering most of the market is still under the influence of resistance It’s about as aggressive as I’m willing to be at the moment.  It might be wise for some to consider taking profits on current positions before entering new trades.

Trade Wisely,

Doug

Friday’s afternoon rally left price action clues of bullishness.

Clues of bullishness were left behind on Friday but let’s not forget resistance may still have something to say.  As much as I would like to see a bullish breakout, I also have to recognize that both the SPY and DIA still have need fight through new high resistance.  It is very importance we put aside the bias of what we want to happen and be willing to see clues of reversal as we test resistance.  Believe me, I want to see the market breakout, but that is a bias that can be very dangerous.  As we test resistance levels, I must remain objective and focused on the price action.  Like it or not, isn’t this exactly where a failure could occur?  Stay sharp, focused and flexible!

On the Calendar

We kick-off the new week with a newly elected French President at the helm.  At least, for now, the market seems to support Macron removing a little uncertainty.  We have 2 Fed speakers before the market opens, but after that, the Economic Calendar has nothing else of note.  On the Earnings Calendar, the market faces another big week of reports.  Today there are more 260 companies reporting so remain vigilant in your preparation for new and existing positions.

Action Plan

I must admit to being a little disappointed seeing the futures point to a lower open this morning.  With the end of the day bullishness on Friday and the French election, not ruffling feathers I was expecting more bullishness.  As normal I looked through a lot of charts this weekend.  Although one can clearly see a tentativeness in the broad market, there are a substantial number of bullish charts with good signals.  If the overall market begins to display a little follow through strength, I will be looking for new positions today.

Anytime we are at or near new highs it’s easy to make the mistake of becoming complacent.  Always keep in mind that a failure at resistance is possible.  It’s very important to remain watchful for clues of reversal when testing new highs.  Head fakes and whipsaw price action are always possible at resistance.  Equally important is avoid predicting and simply follow price action.  Currently, my read of the price action of the overall market as bullish but I know it can pivot in about half a heartbeat.  If we simply follow price rather than thinking, we can predict it; we will naturally be more flexible if a change occurs.

Trade Wisely,

Doug

Price Action continues to consolidate in a very tight range.

Overall the price action of the market remains fenced into a very small range.  I think most would like to see that north gate open which will put a lot of pressure on the Employment number to perform well.  However, the south gate is under pressure from uncertainty as well as falling oil prices.  The longer the Bulls and Bears are confined, pressure will continue to increase making a big move possible.  One thing is for sure; I will carefully watch both fence lines, prepared to react if one gives way.  Now is not a time to be blinded by bias.

On the Calendar

Today we get one the most watched number on the street, the Government Employment Situation Report.  The March number was a disappointing 98k but the consensus expectation today is 185k.  Although this number seems to be very inconsistent, it remains on the best gauges on the overall health of the economy.  After all, if jobs are growing, then business must be growing, and consumers must be happy and confident enough to part with their money.  The Employment Situation number comes out at 8:30 AM Eastern so any reaction to the number will be before the open.

Beginning at 11:30 we have a string of Fed speakers including Chairman Yellen at 1:30.  If they happen to utter something that the market is not expecting plan on a market reaction.  There are just over 100 companies reporting today.  I either looked at the Earnings Calendar wrong, or they made some changes because next week is now another big of reports.  Ugg!

Action Plan

Yesterday I spoke bullishly about the overall market, but the sell-off in oil left us stuck with more choppy price action.  Currently, I am still bullish holding several profitable long positions however if oil continues to slide south it obviously keeps the Bulls penned up.  The Employment Situation number could be the deciding factor today.  Friday is profit day, and I am planning to put some money in the bank.

Trade wisely,

Doug

Positive price action at support inspires a little bullishness.

Seeing a little positive price action at support encouraged the Bulls to work a tiny bit harder yesterday.  As expected there was no interest rate increase, but the odds of a June increase are now better than 90%.  However, it’s important to note even with three more 25 basis point increases the prime rate will still be below 2%.  The news out of the Washington DC says we can expect a vote on the new health care bill today.  It would appear they have finally acquired enough votes to get the job done.  I suspect that is one of the reasons we are seeing the futures pushing higher this morning.  Today is also the last big day of earnings this quarter with nearly four times more reports than are scheduled for all of next week.  If the Friday Employment Situation report is as positive as the ADP suggests, a bullish breakout could be in the cards.  Only time will tell.  If you happen to be an old Star Wars fan, May the 4^th be with you!

On the Calendar

On the Economic Calendar, today is International Trade, Jobless Claims, and Productivity Costs all coming out at 8:30 AM Eastern.  At 10 AM we will get the Factory Orders number.  As usual the most important of the these will be the International Trade & Jobless Claims, but they would need a surprise to move the market.  Please keep in mind that Friday is the big Employment Situation report.  Chalked full of reports today is the Economic Calendar with 558 companies revealing quarterly numbers.  Today is the last big earnings day this quarter. Yeah!

Action Plan

After giving up ground in the morning, the Bulls dug in and pushed back finally showing some strength.  It’s going to be important for the Bull’s to step up again today and follow through with another show of force.  Typically the market will be choppy ahead of the Employment Situation Report, but Wednesday’s strong showing of 175K in the ADP could inspire a bit of confidence in the Bulls.  Currently, the futures are pointing to a 50 point gap up which is encouraging.  I will be looking for new positions today.  Keep in mind Congress is expecting to vote on the new health care bill today.  If it finally passes, I think the market will view that as a positive.

Trade wisely,

Doug

Choppy price action expected, uncertainty abounds.

Choppy price action is the norm as the market waits for the announcement.  Today could be extra challenging due to earnings reports.  Apple missed the mark yesterday which could prove difficult for the QQQ to continue it’s leadership higher.  Both the DIA and the SPY are in tight consolidation ranges not providing us directional clues just yet.  Toss in the FOMC, the Employment Situation Report on Friday along with a slew of earnings, uncertainty abounds.  As always try to avoid all the noise and emotion by staying focused on the price action.

On the Calendar

Today on the Economic Calendar we have a couple of potential stumbling blocks.  The first being the Petroleum Status Report which had shown a small improvement in supplies.  However, there was a recent story about the US, and I think Lydia have ramped up production which tosses the Status number into question.  Then, of course, have the FOMC Announcement at 2:00 PM Eastern.  I think it’s very doubtful the Fed will raise rates today if they reference more hike in the near future the market will react.  The ADP Employment is at 8:15 AM and ISM Non-MFG index come out at 10 AM.

On the earnings calendar, we continue to ramp up with more than 400 companies reporting today.  Please continue to look before leaping into a trade just before and earnings report.  Use TWLO as an example of how being uninformed can cost you a bundle!

Action Plan

FOMC days tend to be very challenging days to trade.  As a general rule, the price action is slow and choppy until the announcement, and then volatility goes wild with big up and down swings in just a few minutes.  Once the initial reaction subsides, Yellen gives a press conference stirring the pot again.  I would encourage new or struggling traders to stand aside avoiding the additional risk.

Another complication today is that APPL missed earnings yesterday afternoon.  The selling was not extreme in the post-market, but the influence of APPL can move markets if selling pick up today.  Currently, the futures are pointing to a modestly lower open.  I want to take an extra dose of caution this morning.  Perhaps the market can shake off the poor reports, but I don’t want to risk more capital until I see that in the price action.  I’m expecting choppy action until the FOMC announcement, so there is no need to rush new entry decisions.

Trade wisely.

Doug