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