Resiliency

After bearish gap down yesterday the bulls proved their horns continue to very sharp recovering almost all of the losses.  The ViX indicated a little fear was creeping in at the open, but the resiliency of the bulls quickly began to put those fears to rest.  Market trends continue to be strong yet appear extended.  It’s very important not to over-trade or chase during periods like this.  Choose new trades wisely with low-risk entries and consider releasing the pressure on winning trades by taking at least partial profits.  With earnings season about to kick off plan for move volatility and overnight gaps as the market responds.  Focus on price action, stay disciplined to your rules and prepare for anything like the market continues to push the upper boundaries of this strong bull run.

On the Calendar

Thursday’s Economic Calendar kicks off at 8:30 AM with two potential market-moving reports.  First is the weekly jobless claims that are expected to decline 5000 to 245k vs. 250k.  Second is the PPI-FD which forecasters think will rise 0.2% vs. the 0.4% increases each month last quarter.  There are a couple of lessor reports and a bunch of bond announcements during the day but nothing likely to move the market until the 2:00 PM Treasury Budget.  The Treasury deficit is expected to come in at $36.0 billion for December.  Then at 3:30 we have a Fed speaker as their speaking tour continues.

On the Economic Calendar, we have 18-companies expected to report.  If very important to get into the habit of checking the reporting dates of stock you own an those that you are planning to purchase.  Failure to do so can be a very costly mistake that traders can easily avoid with a little preparation.

Action Plan

Yesterdays gap down was a wakeup call that the bears are still here and hungry.  However, the Bulls really went to work yesterday to recover most of the initial losses.  This morning the futures a suggesting a slightly higher but mostly flat open today.  Although there are some earnings today, the market could wait for the big bank earnings on Friday to look for inspiration.  Also on Friday, we get the very important CPI report and Retail Sales numbers which are both market-moving reports.  As a result, we could see light and choppy price action today as we wait.

The trends are still in place so I will continue to trade with the trend, but I will also take into account that the market appears extended when considering new risk.

Trade Wisely,

Doug