Some nasty retail earnings and tough talk raise concerns about the so-called Phase 1 trade deal bring a needed pause in the bull run.  Even bulls need a little rest from time to time, and this little pullback may prove to be very productive as long as the overall index trends hold.  Better earnings results out from TGT and LOW have already recovered some the overnight losses in the futures market now suggesting a modest gap lower at the open. 

Overnight Asian markets closed the day bearish across the board on growing trade tensions. European markets are also reacting lower this morning, seeing red across the board.  US Futures have lifted overnight lows but continue to point to modest declines ahead of more impeachment hearings and the FOMC minutes due out at 2 PM Eastern today.

On the Calendar

On the hump day Earnings Calendar, we have more than 50 companies reporting today.  Notable reports include LOW, TGT, JACK, LB, LZB, NTES, and QIWI.

Action Plan

Yesterday’s gap up opens eventually turned into a pop and drop pattern with the Dow closing the day with a bearish engulfing candle.  However, the SPY and QQQ found enough buyers by the end of the day, and the price action finished the day with just a little rest from breaking daily records.  It would seem tensions between the US and China have once again flared with new tariffs threatened as part of the rhetoric.  Today the impeachment show continues on the capital hill while the market waits for the FOMC minutes at 2 PM Eastern.

Even with the slight bearishness of yesterday index trends remain intact while the VIX continues to register little to no fear of in the market.  Although the futures are under slight pressure this morning, I see this pullback as nothing more than a rest so far.  Of course, that could quickly change if the Phase 1 proposal falls apart, but my guess is that’s not likely at least for now.  We needed a little rest, and as long as the overall trends hold, this pullback may well prove to be nothing more than a pause in an otherwise very bullish trend.  Futures point to modest gap down at the open, but be very careful chasing the open down as many will see this as an opportunity to buy.  As always, wait for proof of follow-through!

Trade Wisely,

Doug