Strong Earnings performance.

A slight decline in rates coupled with strong earnings performance gave the bulls want they needed to recover a good deal of the Tuesday sell-off.  While the relief rally produces some very nice profits for us, we must recognize the significant resistance that lies above on the DIA, SPY, and QQQ.  With the GDP expected to show a decline in the 1^st quarter the bull may find it difficult to drive higher ahead of the weekend.  Even if the numbers come in better than expected, it would not be out of the question to see some profit-taking after the 2-day Dow rally of nearly 500 points.  Also, keep in mind there are 100 companies reporting earnings today, so continue to expect fast price action and watch for the possibility of reversal with such strong resistance above.

On the Calendar

We get things going on the calendar with the very important GDP report at 8:30 AM Eastern.  According to forecasters, the GDP should come in at 2.0 for the first estimate of the 1^st quarter vs. 2.9 in the 4^th quarter.  Consumer spending is expected to sharply decline to a 1.1% rate vs. the very strong 4.0% from the 4^th quarter.  The GDP price index is expected slightly higher at 2.4%.  Also at 8:30 AM, the Employment Cost Index, is also expected to tick higher to 0.7% for the 4^th quarter reading vs. 0.6% in the 3^rd quarter of last year.  Consumer Spending comes out at 10:00 AM expects a decline to 98.0 vs. the 101.4 reading in March which was a 14-year high.  The Oil Rig count come out at 1:00 PM and Fram Prices at 3:00 PM but are not expected to move the market.

The Earnings Calendar now shows 100 companies that will report today to close our a huge week of earnings.  However, don’t relax just yet because next week is also a very big week on the earnings calendar.  Keep checking and stay on your toes.

Action Plan

With such a nice rally yesterday I would love to sound the all-clear siren, but the truth is all we have done to this point is to rally back into a zone of resistance.  After making significant strides to recover the Bulls now face a tough level of price resistance and the 50-day moving average.  Great earnings out of AMZN, INTC, and MSFT after the bell may offer some help, but currently, the Futures markets are pointing to a lower open.

Lately, Friday’s have experienced profit taking as traders the get out the way before the weekend.  With Economic reports, this morning expected to show a weakening of consumers in the 1^st quarter the bulls may find it challenging to push higher.  Of course, with 100 companies expected to report today, we should expect this week’s bumpy ride to continue.  Watch for clues of reversal and have a plan to respond.  Have a wonderful weekend!

Trade Wisely,

Doug