Patience is a virtue.

We have all heard the axiom that patience is a virtue.  With 13 years experience as a full-time trader, I can confidently confirm that patience is a key quality for all traders to develop.  Currently, we see the DIA and SPY pulling back with the futures pointing to significant gap down open this morning.  There will be bullish traders that will try and anticipate or predict the turning point.  There will also be traders that only see bearishness in the market and will chase short positions on the gap down.  Both actions demonstrate a lack of patience.

Good traders with high win/loss ratios share some similarities to a good sniper.  They will wait patiently, quietly and unemotionally focused on the right time to act.  If you’re bullish, wait for the bullish signal when buyers step back in at or near price support.  If you’re bearish, wait for the signal of failure at or near price resistance.  Be patient, focus on price and wait for that good signal to pull the trigger.  If to rush or anticipate your shot you’re very likely to miss your target and have an undesirable effect on your account.

On the Calendar

The Monday Economic Calendar gets going at 10:00 AM Eastern with the Housing Market Index.  Consensus expects the housing index to remain steady and strong with an unchanged reading at 70 in June.  We then have three bond events and two Fed Speakers at 1:00 PM and 4:00 PM to close the calendar day.

On the Earnings Calendar, there are only nine companies expected to report results today, none of which are market moving.

Action Plan

After gaping down Friday morning, the Bulls stepped back in lifting the Dow and the SPY off the morning low and finishing the day with hammer patterns.  The QQQ traded sideways and the IWM finished the day at a new record high close.  Unfortunately, it currently looks unlikely the hammer patterns will get the follow-through higher to confirm this morning with the Dow futures pointing to more than a 150 point gap down.  Of course, it could be a very different picture at the end of the day if the Bulls dig in and fight back but political uncertainty seem to have given the Bears the upper hand at least for the short-term.

The good news is that the overall market uptrend is still valid, but there is reason to exercise a little caution.  If the Bulls step up defending the trend, this pullback could produce nice low-risk entry points, but I would caution you not to anticipate entries.  I would also be cautious about chasing short positions with uptrends still intact especially after a gap down open.  There is no rush.  Stay focused on price action and wait for a signal before jumping in.

Trade Wisely.

Doug