Difficult Decisions.

The open of the market today is presenting traders difficult decisions.  Currently, the Dow Futures suggest around a 100 point gap up at the open.  Will you dive in head first on a day the market closes early ahead of a holiday shutdown?  Or, will you remain cautious and risk missing out on a possible market bottom?  Certainly a difficult decision amid all the political uncertainty with the new tariffs taking effect on July 6^th.

Trading is a marathon, not a sprint and I know if the market begins a rally there will more than enough opportunity for me to make money without having to chase a gap ahead of a holiday.  We could see a bullish follow through on Thursday when trading resumes, but there is no question in my mind that it could just as easily reverse producing a bearish open on Thursday.  As for my decision; Instead of adding risk I will be looking to take advantage of the morning gap by taking profits and reducing my market exposure ahead of the holiday shutdown.  Your difficult decision awaits, plan your choice carefully.

On the Calendar

Ther are two potential market-moving reports on this short day of trading.  The Motor Vehicle Sales report according to consensus will reach a 17.0 million annualized rate in June vs. the 16.9 million units in May.  At 10:00 AM Eastern Factory Orders which includes data on non-durable goods expects to come in unchanged.  The Redbook comes out at 8:55 AM but is not expected to have any price impacts on the market.  Keep in mind the market will close early at 1:00 PM Eastern time in observance of Independence Day and will be closed all day Wednesday.

There are only six earnings reports today and looking over the list I would say none of the reports are likely to move the market.

Action Plan

It was nice to see the Bulls battle their way back after gaping sharply lower at the open.  The good news is that all the major indexes held just slightly above prior lows.  The bad news is that even with the rally all the indexes lacked the energy to break above current downtrends.  The trend of big morning gaps looks to continue this morning with Dow Futures suggesting a gap up around 100 points.  Keep in mind even with today’s morning gap the Dow will still be about 200 points below its 50-day average.  The SPY looks to recover it’s 50-day average at the open while the QQQ and IWM successfully held above this key average.

As you know, I’m always cautious about large gap opens and the fact this one is occurring just before a major holiday and a short session only increases my level of caution.  Remember volume is very likely to drop significantly after the morning rush.  Rather than adding new risk, I would be more inclined to take advantage of the morning bullishness to take some profits ahead of the holiday shutdown.  I wish you all a fantastic holiday as we celebrate our 242^nd year of Independence.

Trade wisely,

Doug