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