Hypersensitive

I must admit after the close yesterday I was encouraged that daily range of price action seemed to be calming slightly.  I was also happy to see the bulls ability to defend the big Tuesday gains as the SPY tested the 50-day average from below.  Sadly after the close, news of the Cohn resignation, reignited the volatility of this hypersensitive market.  Currently, the futures are pointing to a substantial gap down at the open.  If selling persists after the open, we could see another failure of the 50-day average and another lower high.  We should prepare for very fast price action at the open and the possibility that last Friday’s low might see a retest.  Buckle up it could be a bumpy ride today.

On the Calendar

A big day on the Economic Calendar begins at 8:15 AM with the ADP Employment Report which is expected to show 195,00 gain in private payrolls.  At 8:30 AM the International Trade deficit is expected to widen to 55.1 in January vs. February’s 53.1 reading.  Also at 8:30 is the Productivity and Costs report which according to consensus rose at an annualized 3.2% rate.  10:30 AM brings the EIA Petroleum Status Report which is not forecast forward but has recently supported oil prices showing supply declines.  The Beige Book which is used by the FOMC when making a rate decision is out at 2:00 PM today.  If it shows, inflationary pressures are rising the interest rate hypersensitive market could react.  Also on the Calendar this morning are three Fed Speakers on the speaking tour ahead of the FOMC meeting later this month.

On the Earnings Calendar, there are just over 150 companies expected to report results today.  By in large earnings continue to come in mostly positive with earnings growth projected this year.

Action Plan

The price action yesterday was very 2-sided, but at the close, I was happy to see the range of the day finally staring calm down a little.  Unfortunately, after the close, a sucker punch came flying in as the Wall Street-friendly Cohn resigned.  Futures moved sharply lower on the news and this morning as I write this a gap down of about 300 Dow points look likely.  So much for calming down!  Technically speaking this new could not have come at a worse time with the major indexes testing the 50-day moving average.  The big question to be answered now is; will last Friday’s low hold as support?  Let’s hope cooler heads prevail.

Expect very volatile price action this morning as the market works through the emotion of the morning gap down.  Intraday whip-saws are likely, and price action could be very fast.  Anything is possible so remain flexible and avoid making decisions based on your particular bias.  Focus on price and the clues it will provide.

Trade Wisely,

Doug