No Follow-Through

Longer term the Bulls are still in control but a close look at the short-term and it’s the Bears with a slight upper hand.  Last Thursdays mean selloff and rally produced bullish hammer candle patterns, but as now, price, has not been able to follow-through to the upside.  The SPY and QQQ have made a nice attempt on Friday but at the end of the day fell just short.  As a result, I made no new buys on Friday and took more of a wait and see attitude.

With the VIX rising from historic lows we may experience some choppy price action with nasty whipsaws intra-day.  I would be careful not to chase trades (bullish or bearish) at the market open.  Stay very focused and flexible with well-planned trades to avoid emotional decisions in the heat of the moment.  If by chance the Bears do gain a firmer grip the VIX could spike quickly, and selling could accelerate.  That is why I will need to see the Bulls print a candle that breaks the high of the prior day before I add additional long risk.

On the Calendar

The Economic Calendar begins quietly but later in the week is full of important reports.  Other than some bond auctions there’s a 2:00 PM Treasury Budget report which is very unlikely to move the market.

On the Earnings Calendar, we are now showing just over 170 reports today.  A few noteworthy are FL, BBY, DKS, SFUN, DQ, ANF, WPRT, WUBA, SORL to name a few.  Continue to stay on top of reporting dates for companies you own or are considering for purchase.

Action Plan

The Futures market is starting trading last night in the green responding to a huge shopping and spending day in Asia.  At about 11:00, however, the bears came back out to play can currently suggest a gap down of more than 40 Dow points.  That would mean a gap below Friday’s low on the DIA and make a retest of the Thursday low a possible target.  The QQQ has been the strongest of the indexes while the IWM is obviously the weakest.

Overall the index trends in DIA, SPY, and QQQ are still bullish but are continuing to show some signs of stress.  The VIX is showing a slight increase in fear, but let’s keep in mind the all the earnings reports in the next couple days anything is possible.  A few good reports and Bulls may find their footing for a push higher.  A bullish candle that breaks the previous days high is the clue I will be watching hoping to see.  However, the Bears will maintain short-term control as long as lower higher candles continue.  I suggest a little caution in order and stay very focused on price action for clues.  Also, keep in mind with the VIX on the rise choppy price action with quick reversals are possible.

Trade Wisely,

Doug