Fear of Missing Out

Another day and another big gap expected as volatile price action continues.  With so much drama in the price actions, it’s easy to feel the as if your missing out.  The fear of missing out is a very powerful emotion that will often cloud a traders judgment, and the chaise is on.  Traders will leap without looking buying positions at or near price resistance level.  Sometimes you will be rewarded for taking this risk, but often you get in right at the point where profit-taking begins.  If the futures remain at current prices, the DIA and the SPY will gap up to 50-day average resistance.  That means both indexes will be up over 17% in just five days.  Consider that as you plan the day ahead.

On the Calendar

A big day on the Economic Calendar this Thursday.  We have four important reports coming at 8:30 AM Eastern.  1. Jobless Claims – expected to rise to 229K vs. the 221K on the last reading.  2. Pilly Fed  Bus. Survey – expected to hold steady and strong at 21.0 which is said to be near capacity.  3. Empire State Mfg. – Is expecting to slow slightly from the Jan. 17.7 reading to the Feb. consensus of 17.5.  4. PPI – forecasters see overall producer prices gaining 0.4%, less food, and energy up 0.2% and trade services also up 0.2%.

At 9:15 is the Industrial Production numbers which consensus expects to increase 0.2% with capacity utilization up one-tenth to 78.0%.  The Housing Market Index is out at 10:00 AM and is expected to show steady strength but unchanged at 72.  Treasury International at 4:00 PM is not forecasted forward but tracks the flow of financial instruments into and out of the United States.  Also on the calendar are several non-market-moving reports as well as a bunch of bond events.

On the Earnings Calendar, I show just over 170 reporting results today to keep us on our toes.

Action Plan

Nice rallies across all four major indexes but only the QQQ’s have managed to cross back above the 50-day average.  Dow Futures are very strong this morning pointing to more than a 200 point gap up testing 50-day average on the DIA and the SPY.  A failure at or near the 50 SMA would set up a possible Blue Ice Failure pattern so be careful not to chase this gap up to resistance.  With any luck, the leadership in the QQQ will help lift the markets out of the danger zone.  Another positive for the market is that the VIX finally broke lower yesterday to close below a 20 handle.  Continue to expect very fast price action and watch price closely for possible whipsaw action at resistance levels.

Trade Wisely,

Doug