Volatile Price Action raises questions of a top.

The volatile price action yesterday makes me question if we are truly experiencing a topping pattern under construction.  If so it can be a very dangerous time to trade.  Tops will normally display a lot of false price reversals and nasty intraday whipsaws.  It may be time to reduce trading activity, so we don’t get chopped up in the volatility.  If you have not already considering raising cash in your account it may now be the time.  Always remember that Cash is a position.

On the Calendar

We kick off this Thursday on the Economic Calendar with Jobless Claims at 8:30 AM Eastern.  Claims have been very low, and the forecasters expect them to continue to move lower today.  Also at 8:30 is Philly Fed Business Survey which has been exceptionally well.  Backlog orders have been rising month over month but the expectation for today is for a very slight pullback in the number.   We still have two less important number at 8:30, Empire State MFG as well as the Import and Export prices.

At 9:45 is the Industrial Production number where the consensus is suggesting a 0.2% gain to 76.8% which is very strong.  We have a Housing Market Index report at 10:00 AM and the Treasury International Capital at 4:00 PM, but both are unlikely to move the market unless they come in with a big surprise.

Action Plan

Looking at the futures this morning, I am very happy to have been cautiously sitting on the sideline yesterday.  If you were there with me, then you are also enjoying the relief of know that your capital is safe while the market goes through its gyrations.  The whipsaw after the Fed numbers was a nasty one and I wouldn’t want to rule out the possibility of more today.

I would expect a lot of fast moving price action this morning.  If the Bears really take control, we could see some panic of a top move into the market.  However, if the Bulls continue to fight back as hard as they have been doing lately, then we could easily see a full reversal back up.  Unfortunately, unless you are an experienced day-trader, it would best just to stand aside and protect your money.  I plan to continue being very cautious and don’t expect I will be adding any new risk this morning.

Trade Wisely,

Doug