Rising uncertainty rattles the market.

The strong earnings rally met with some profit taking and risk reduction yesterday.  The overall trend is still up, but the rising uncertainty with North Korea as we head toward the weekend has many traders reducing risk.  Currently, futures are pointing to a gap down this morning that may threaten price supports at the open.  Should they break, we could see a quick move lower as stop loss orders will likely start to trigger in rapid succession.  The Bulls have been very strong, but this morning will be one of the first tests of their resolve at price supports.  A successful defense by the Bulls could setup some very nice entries assuming you want to add risk ahead of the weekend.  Plan carefully.

On the Calendar

As normal the Thursday Economic Calendar starts the market day with the weekly Jobless Claims report at 8:30 AM Eastern.  Good claims numbers have continued all year, and forecasters see claims rising just slightly to 241K up from 240K last week.  Also at 8:30 AM is the much more important PPI-FD report.  The inflation tracking report has been very flat only managing a 0.1% gain overall on the last reading.  Forecasters are suggesting only a slightly higher reading this month of 0.2% core minus food and energy.  We have a Fed Speaker at 10:00 AM with the Treasury Budget report at 2:00 PM rounding out the day.

The Earnings Calendar is showing more than 225 companies in one of the last big reporting days this quarter.  One of the big reports today will be from NVDA after the market closes.  It will be very interesting to see how the market responds as this earnings season winds down and North Korean uncertainty ramps up.

Action Plan

Thus far the selloff has been very controlled with fear only rising slightly.  At the close of yesterday both the DIA and the SPY held above price supports with the SPY finding enough dip buyers to close near the high of the day.  The QQQ’s also found buyers rallying back up after a somewhat spooky gap down at the open.  The poor beleaguered IWM gapped down and stayed below its gap all day long even though it did manage a small bounce off the intraday lows.  Futures are currently pointing to a substantial gap down as the saber rattling intensified overnight.

Looking through my watch-lists near the end of the day, I found a nice group of very good looking charts.  The temptation to buy the dip was very strong, but I stuck to my rules and decided to wait for follow-through price action.  Looking at the futures this morning, I can once again thank my trade plan for saving me capital.  I will look for new trades today, but with the weekend coming and the looming crisis with North Korea, they will have to be stellar setups for me to take action on them.

Trade Wisely,

Doug