How clever are you?

The Friday was a welcome sight but was it truly a hold of price support.  When the market is bearish, it’s easy to for traders to mistake a relief rally for bullishness.  Please keep in mind that a one-day-rally does not reverse a downtrend.  Remember to confirm a bullish candle price must follow through.  Over the years I learned that lesson the hard way by jumping in thinking I was clever enough to catch the exact bottom.  Although it would work every now and then, more often than not, I had my head handed to me with a big loss.  Not so clever after all!

I just like you am hopeful Friday’s rally will prove to hold price supports.  The operative word is “prove.”  One day of bullish price action is hopeful, but it is not proof!  The truly clever have the patience and discipline to wait for some proof and consequently take much less heat on their trades.

On the Calendar

W begin this week on the Economic Calendar with only one important report.  At 10:00 AM Eastern the IWM non-MFG index is expected to decline a bit but still very strong at 58.8 vs. January’s 59.9.  There are two reports that are not expected to move the market as well three bond actions and a Fed Speaker at 1:15 PM.

On the Earning Calendar, we have just about 60 companies fessing up quarterly results.  Make sure to keep checking as the earnings season continues to drag on for what seems forever.

Action Plan

After gapping down nearly 200 in at open, the bulls found some energy to rally off the lows in all four of the major indexes.  With the fear of Trade Wars heating up the futures are holding up better than I would have expected this morning.  As I write this, the Dow Futures on pointing to a 50 point gap down.  Not great but better than the triple point gaps of late.

Volatility is likely to remain high, but the hope of the QQQ, SPY, and IWM holding support is encouraging.  If we could get a little calming of the nerves and have price action take a little rest, perhaps better trader could be just around the corner.  Don’t mistake hope for bullishness.  Remember we are still in a downtrend and a hold near price supports may only be temporary.  Stay focused on price action, stay disciplined to your rules and plan carefully.

Trade Wisely,

Doug