Rest Stop?

After another day of record-breaking highs, the Bulls largely decided to relax at a rest stop yesterday afternoon.  The question is will the Bull finish the remaining days so August strong or will they give the Bears a chance to feed.  It’s common after a major break out to see a consolidation or pullback to test support.  Unfortunately, there is no rule as to when that might occur.

Consequently, we have to stay with the current trend but prepare for the possibility of a pullback without bias.  I have been taking advantage of the current rally by taking profits and lower my overall risk to a pullback.  It’s very important to guard yourself against over-trading at or near market highs.  I hope that this is just a rest stop, and we will close August strong, but hope never pays the bills.  Stay focused on price action and always be prepared to protect your capital if the market decides to turn south and test support.

On the Calendar

Today’s Economic Calendar has three potential market reports.  First, GDP at 8:30 AM is expected to come in 4.0 percent with consumer spending coming in at 3.9 percent and GDP price index is seen holding at 3.0 percent.  At 10:00 AM, Pending Home Sales Index expect the July reading to come in unchanged at 0.9 percent.  Then at 10:30 AM is the EIA Petroleum Status report which is not forecasted forward but has recently shown an build in US supplies.  Other than that we have Corporate Profits @ 8:30 AM, the State Street Investor Confidence Index @ 10:00 AM, Bond Auctions @ 11:30 AM & 1:00 PM, with Farm Prices @ 3:00 PM to wrap up the day.

The Earnings Calendar today shows over 40 companies fessing up to results.  Among them, before the bell is AEO, DKS, and MOV.  After the close CRM, GES, and PVH are among those reporting.

Action Plan

Another day another record high close for the SPY, QQQ, and IWM indexes.  However, yesterday the Bulls seemed to run out of energy, but interestingly enough the Bears seemed to remain in hiding.  Asian markets closed mixed while the European markets all appear to be drifting lower.  Currently, US Futures appear mixed and at the moment point to a relatively flat open.

Hopefully, you have taken advantage of the rally and taken some profits because the market seems a bit unsure at the moment what comes next.  Commonly after a big break out prices will pull back to test support.  However, this could also be just a rest stop along the way to higher prices to finish out the month strong.  Only time will tell, and we will have to stay focused on price action to find the clues.  Historically, September and October are challenging months with higher volatility, but with the market currently very strong, there is no clue to that so far.  Stay with the trend but be careful not to overtrade around market highs.  The Bears are not showing themselves at the moment, but we know there always lurking around waiting to feed on unprepared trader accounts.

Trade Wisely,

Doug