No-Trade Zone

Quarterly earnings result continue to roll in strong, but the bulls appear to be uninspired.  Perhaps they see the stocks as fully valued or just taking a rest to nurse a January party hangover.  With the Indexes having broken the up-trend its had to be bullish, but on the other hand, there is also very little reason to bearish.  Consequently, we temporarily find ourselves stuck in a no-trade zone.  At any moment either the bulls or bears could establish dominance, but as of right now they seem equally matched.  It’s times like this the trader has to take steps to protect your capital a resist over-trading.  When a market becomes choppy and volatile, it is very easy to give back some, all or even more of hard-won gains.  Slow your roll and be very picky about the trades you take.

On the Calendar

We kick off the today’s Economic calendar at 8:30 AM Eastern with the Weekly Jobless Claims.  Initial Claims continue to run at very low levels with a consensus expectation of 235K.  Productivity and Costs are also out at 8:30 and forecasters see nonfarm productivity rising 1.1% with labor costs up 0.9%.  At 9:45 AM PMI Mfg, Index is expected to post the best reading in 3-years at 55.5.  Selling prices reached 4-year highs both pointing to economic strength.  The ISM Mfg. Index comes out at 10:00 AM.  December New Order results hit a 14-year high and consensus see’s continued strength with a January reading of 58.6.  Last but not least, Construction Spending is seen rising 0.5% and home improvements up 0.7%.

On the Earnings Calendar, we have more than 160 companies reporting today.  A few of the notables before the bell today are BABA,  COP, UPS, and VLO.  After the bell, GOOG, and GOOGL will take center stage along with AMZN and AAPL.

Action Plan

To be honest, I was expecting a bit more fireworks to accompany the FOMC statement yesterday that indicated a more hawkish stance.  Instead, the price action just slowly drifted lower finding support at the lows before grinding back up.  After the close, FB, MSFT, QCOM, and all reported very strong earnings, but except for T, the market seemed unimpressed.  As I write this, Dow Futures are indicating a flat to slightly bearish open.

As earnings continue to roll in, we should expect volatile price action and opening gaps to continue.  As you plan the rest of your week keep in mind that Friday is the big Unemployment Situation number.  It would not be unusual for price action to become choppy and two-sided as we wait.  Heightened caution is warranted.

Trade Wisely,

Doug