The Price Action is Encouraging.  The question is can it break through resistance?

The price action Monday was very encouraging.  I kept going through charts and must admit the temptation to break my rules was strong.  During the RWO session yesterday I marked up the index charts to illustrate where I would see proof of a reversal.  My plan and the discipline to stick to it kept me taking the leap.  With the Dow futures posting overnight lows of -60 points once again confirmed that sticking to a plan is the right thing to do.

To be honest, there are times when sticking to my plan has at times cost me money.  We have all seen a reversal that rips higher and never looks back.  At those time you want to kick yourself for sticking to a plan, however, most of the time, the plan will save you from yourself.  I can show you years of statistical data to prove that sticking to a plan works.  It shows that following a discipline (a process) that a plan provides is priceless.

Boring right?  Who wants to follow a bunch of rules?  A simple question to ask yourself if you trade without a plan; Is your account growing consistently?  If your answer is no, then the question has to be are you willing to change?  If you answer that question with an emphatic YES, then you have made a breakthrough.  Your next step is clear.  If you answered No; my suggestion would be to stop trading right now!  Find an advisor that will put you in some diversified mutual funds.  You and thank me later.

On the Calendar

Today we have a couple of market-moving reports on the Economic Calendar.  First up we will get a reading on Housing Starts at 8:30 AM Eastern time followed by Industrial Production at 9:15.  Between these big report, we have another Fed speaker with something to say at 9 AM.  Today we have 53 companies reporting as we ramp this earnings season.

Action Plan

In the last hour, the futures have been climbing back toward positive gaining almost 50 points.  The rally is mostly a result of the big bank earnings on BAC and GS.  Their numbers were positive, but I have to say looking at the charts there is nothing that impressive.  I plan to be cautiously optimistic today when looking for new positions.  I will not be at all surprised to see a retest of overnight lows, however.  Please keep in mind the indexes are right at the point where a failure to break the downtrend is likely to occur.  The conditions are perfect for a whipsaw so plan accordingly.

Trade wisely,

Doug