A big week of heavyweight earnings, big economic reports, and the FOMC rate decision the conditions are right for the perfect storm for high volatility.  With prices testing the long-term downtrend resistance and the short term trend up and appearing overextended it’s unwise to ignore the possibility of a selloff.  There at a lot of clues pointing to caution.  However, the direction will likely come down to earnings results and the FOMC decision. 

Because many of the Tech heavyweights report after the market closes, we should also expect the possibility of overnight reversal gaps and plan our risk accordingly.  Asian markets closed mixed but mostly lower while European markets are currently lower across the board.  US Futures have been under some selling pressure all morning and currently suggest a lower open.  Stay focused on price action and don’t be surprised to see higher volatility and challenging price action ahead.

On the Calendar

On the Earnings Calendar, we have a very big week ahead with more notable earnings than I have the time to note here.  Make sure you’re checking earnings reports against all current holdings and new positions you’re considering.  Today we have 73 companies reporting.

Action Plan

The market has a lot to deal with over the next couple weeks, and I would suspect the price action could become more volatile and trading could become more challenging.    On the Economic Calendar this week we have the FOMC rate decision on Wednesday along with the GDP report and then the big Employment Situation number on Friday to name some of the heavyweights.  We also have a big week of earnings with many of most market influential companies reporting which could easily make for some wild price swings.

Price action wise we are simultaneously in the perfect price pattern for the market to rise or fall and I believe it will all be up to the FOMC and how the earnings come out that will decide the direction.  Believe me, I don’t want to see the market pullback, but I think we should prepare for that possibility.  Unfortunately, if it does happen there is a high probability will begin with an overnight gap.  Of course the same is true if the news supports higher prices because many of the big techs report after the bell.  Set your bias aside, remain flexible and focused on price as this week unfolds.  Remember sometimes less is more and we don’t have to trade every day to be successful traders.

Trade Wisely,

Doug