Price action indicates fear of reversal is extremely low.

Although price action yesterday lacked energy it continues to suggest there is no fear.  QQQ’s continued to dominate holding up all the other indexes and marking out yet another record high.  VIX the so-called fear index is once again testing prices near historic lows.  Overall market trends remain bullish, so I will continue to seek long positions but want to guard against complacency.  Always be mindful around market highs that reversals are possible and can develop swiftly.  Maintain focus on price action and be prepared to act no matter the direction avoiding personal bias.

On the Calendar

The hump day Economic Calendar starts will the Chicago PMI at 9:45 AM Eastern followed shortly after by Pending Home Sales at 10:00 AM.  The Chicago PMI has been tracking strongly above the mid-50’s for several months in a row.  Although consensus is expecting a slight pullback this month, the should remain over 57 suggesting economic strength.  The Pending Home Sales Index fell last month, but forecasters are expecting a rebound this month.

This afternoon at 2:00 PM Eastern we get another reading of the Federal Beige Book.  We will also hear from two Fed speakers today.  One at 8:00 AM and the other well after the market close at 7:30 PM.  On the Earnings Calendar, there are 40 companies expected to report today.  Although there is no market-moving earnings report, it is still important to continue checking before entering new trades and managing existing positions.

Action Plan

Yesterday’s light price action was as expected, but there was notable strength in several tech sector stocks.  QQQ, once again claimed new record highs while the other indexes lagged behind on anemic volume.  Futures has fluctuated this morning between negative and positive readings.  I am hoping to see slightly more energy today but will continue to be very picky until I see buyers actively stepping in at these levels.  I will continue to remain bullish if the uptrend continues to hold.

Keep in mind that with all the data points building toward the big Employment Situation report on Friday, that light volume choppiness is possible.  Although I want to trade with the direction of the market, I want to be mindful not get overly long until we see price action proof that new support levels have buyers defending them.

Trade Wisely,

Doug