Is the sky falling?

Is the sky falling with more interest rate increases forecast by the Fed?  We certainly saw some selling yesterday after the news, but I have to say it seemed quite controlled with the Bulls holding up better than one might have expected.  The candle patterns left behind certainly warrant some caution but unless there is follow-through selling the daily bearish patterns will not valid.  So as for now, the sky is not falling, and in fact, with current futures pointing to a flat to a marginally higher, there is a chance the Bulls might maintain control.

Although the Bulls held up quite well, it would be wise to exercise a little caution staying focused on price again for clues.  Guard yourself against predicting or becoming biased and simply follow price action or you might miss the next big potential to profit up or down.

On the Calendar

The Thursday Economic Calendar has four potential market-moving reports.  The first is the Weekly Jobless Claims at 8:30 AM Eastern which expects strong labor demand to continue with a reading of 222,000.  The second 8:30 report is Retail Sales which according to consensus will show consumer strength with a gain of 0.4 percent in May.  The last 8:30 report is Import/Export Prices with Import prices rising 0.5% and Export prices up a more moderate 0.3 percent.  The last potential market-moving report comes at 10:00 AM with Business Inventories rising 0.3 percent in for April according to forecasters, but it’s important to note that underlying sales are growing at a faster rate.  We have Consumer Comfort @ 9.45, Natural Gas @ 10:30, Fed Balance Sheet & Money Supply @ 4:30 as well as four bond events to round out the day.

On the Earnings Calendar, FRED will report before the bell with ADBE taking center stage after the close which is among the 31 companies reporting results today.

Action Plan

As expected, the Fed raised the interest rate by a quarter point but sent the market lower after forecasting two more rate increases this year followed by another two next year.  Although there was some selling after the news, it was rather controlled but signaled a pullback or consolidation of recent gains has possibly begun.  Bearish Engulfing patterns were printed in the DIA, SPY, and IWM while the QQQ left behind a possible shooting star pattern.  Keep in mind these patterns require follow-through to be valid and with the current futures pointing to a flat to slightly bullish open validation could possibly not occur.

Current positions held up quite well yesterday however if we do see follow-through selling today it may be wise to capture gains and wait for new entry signals.  We all knew a pullback was possible and considering the Fed news I have to say at this point the Bulls held up quite well and bodes well for the current uptrend.

Trade Wisely,

Doug