It almost seems unfair!

The Bull run has lasted so long and has been so strong it’s almost shocking when we see that the Bears still have teeth.  It almost seems unfair to be looking so good at the close yesterday to have it fully reversed at the open today.  As an inexperienced trader, an overnight reversal is like being betrayed by a close friend, and I would take it personally.  Yesterday I suggested the market was showing some elevation stress.  As a result, I made no new trades even though there were tempting buys all around me.  Believe me; I had no idea such a big reversal move would happen overnight.  Neither I or anyone else can predict the markets next move.  However, there were clues to market stress that I mentioned yesterday.

On the Calendar

The only market-moving report on the Economic Calendar today is the weekly Jobless Claims at 8:30 AM Eastern.  With Puerto Rico hurricane still a bit of a wild card the forecasters expect a 232K print today.  After that, we get several lesser important reports as well as bound auctions and announcements.

Although Monday and Tuesday of next week have a significant number of earnings reports today is the last really big earnings day this year.  Around 500 companies are expected to deliver results today so prepare for just about anything.

Action Plan

During the night Futures took a turn for the worse, and it was looking like we could have a sizable gap down this morning.  There was a sharp recovery about 11:30 central time, but as of right now the Bears pushed back and are testing the overnight lows.  If the market were to open at this very moment, the Dow could gap down about 60 points.  As a result of the huge number of earnings report before the bell, anything is possible.

Yesterday I wrote that price action was suggesting a little stress from the current elevation.  Although the Bulls made an impressive stand yesterday afternoon, my overall assessment has not changed.  I suggest lifting your caution levels when considering new positions.  Watch for a spike in volatility be careful to avoid chasing because bullish or bearish whipsaws are possible around market highs.  With the weekend nearing after such a long and strong bullish move I will be looking to take profits more than adding new trades.  It’s been a long time since we have seen a big bearish housecleaning move.  I have no idea when it might happen, but I won’t be surprised if we see one relatively soon.

Trade Wisely,

Doug