The Calm Before the Storm

Although bullish, so far this week the price action has been choppy.  Many individual stocks performed well, but overall the market was simply marking time as it waits for the FOMC minutes and the kick off to earnings season.  Think of this as the calm before the storm. As the drama earnings season unfolds, we can expect to see greater premarket futures activity around the reports as the market first speculates and then reacts to the new data.  New and inexperienced traders often find earnings to be very challenging due to the big price swings they can create.

My suggestion is to focus on the price action, support levels, resistance levels and trend of the overall market.  Currently, the trend is up.  Stay the course and trade with the trend but avoid speculating on the individual stock earnings reports.  Also, I suggest turning off CNBC and all the emotion they stir up around events.  Drama is great for their ratings but not so much for your trading accounts.

On the Calendar

The Economic Calendar today is dominated by Fed.  We have a Fed Speaker at 7:17 AM and another at 2:40 PM.  However, it’s the FOMC Minutes releasing at 2:00 PM that will garner the most focus.  The market will be looking for clues not only to future interest rate increases but also details of their balance sheet unwinding plans.  At 10:00 AM  is the JOLTS report which tracks monthly changes in job openings.  The consensus is expecting this number to remain very strong at 6.160 million.

I’m showing just over 20 events on the Earnings Calendar today.  Before the market open we will hear from BLK, DAL, and FAST.  Keep in mind this is the calm before the storm on the earnings front.  Thursday we will hear from C & JPM with BAC and WFC on deck for Friday to kick off earnings season.  Make sure you are doing your due diligence on every trade because, and earnings surprise can be very costly!

Action Plan

Yesterday the morning pop was once again met with whipsaw in price action then followed by lots of chop the rest of the day.  The managed to close at yet another record high while the SPY, QQQ, and IWM chose to rest in a consolidating range.  Futures are currently pointing to flat to slightly lower open, but that could change because I’m writing this 3 hours before the open.

Don’t be surprised to see very light volumes and choppy price action until the release of the FOMC minutes at 2:00 PM.  Directly after the release, we could see some fast intraday price swings in reaction.  After that drama subsides, the market focus will turn directly to the big bank earnings which will begin before the market opens on Thursday.  As you know, earnings reports are unpredictable, and the big bank reports are normally market moving events so plan your trading accordingly.

Trade Wisely,

Doug