Messy Contradictory Price Action Signals.

We are the middle of a big of a technical mess when it comes to the index charts.  The DIA’s trying to make new highs at the same time the QQQ’s are trying to make new lows.  As the SPY remains stuck below resistance, the IWM is showing strength.  It is my opinion that contradictory price action signals such as this make the market a very very dangerous place for swing traders.  The whippy price action and quick reversals are more suited for swift day traders.  If you decide to trade, then prepare for anything.  I suggest smaller than normal positions because stop outs will be commonplace and Emotions will likely run high.

On the Calendar

Today we start off with the Factory Orders on the Economic Calendar at 10:00 AM Eastern.  Orders are expecting to see their second decline in a row with durables just down slightly, and nondurables such as energy remain weak.  We must wait until 2:00 PM for the next report which is the FOMC minutes.  It’s unlikely we will learn anything new from the minutes, but the market is typically choppy and tentative ahead of the number.

On the Earnings Calendar, there are 19 companies expecting to report earnings.  One, in particular, YUMC, has had a lot of member interest lately so make sure you have a plan if you’re holding it as it reports after the close.

Action Plan

Monday the DIA tried to lead a full-on breakout reversing last Thursday’s selloff.  Those that chased in were likely disappointed to see it whip back down before the close wiping out more than half of the day’s gains.  The SPY also attempted an early rally but left behind a black candle below price resistance.  The QQQ once again gave up support testing the lows of last Thursday and closing almost at the low of the day.  IWM, on the other hand, managed to hold above support putting in a bullish morning star pattern.

Talk about a mixed bag of signals and technical mess to try and decipher in the charts.  All of the whippy price action and contradictory directional signals is a head game I’m pretty sure I don’t want to play.  Coming back after a mid-week holiday I think we could see lighter than normal volumes as may trader will likely extend vacations through to next week.  Toss in the FOMC, and you have the formula for a perfect mess that could prove to be very dangerous.  I think I will continue to stand aside as far as new positions until some of this mess gets cleaned up and a direction established.  I will be looking for new trades, building shopping lists and refining them but it will take a nearly perfect setup for me willing dive into this emotional quagmire.

Trade Wisely,

Doug