Whiplash

With a sharp morning gap down and quick afternoon rally fueled by and FOMC surprise you may have a mild case of whiplash this morning.  At the end of the day, the major indexes managed to hold onto price supports but remain in a chop zone below resistance.  In other words, a wide range of consolidation fueled by political uncertainty making it very challenging for short-term traders caught in the whipsaw.

With more trade negotiation tremors likely and a holiday weekend just ahead the challenging price could continue so plan your risk carefully.  Also, keep in mind that we could soon experience lighter than normal volumes as traders take off early to extend their labor day weekend.

On the Calendar

We have a full Economic Calendar this Thursday, but there are only two reports with the potential of moving the market.  Weekly Jobless claims at 8:30 AM according to consensus will decrease by 2,000 to 220K and continuing to show very strong labor demand.  Then at 10:00 AM Existing Home Sales with a consensus annualized rate of 5.600 million will hold the strong gains of the last couple readings.  Other than that Consumer Confort index @ 9:45, Nat. Gas @ 10:30, Kansas City Mfg Indes @ 11:00, Fed Balance Sheet & Money Supply @ 4:30.  We also have Fed speakers at 10:45 AM and 2:00 PM along with 4-bond events today.

The Earnings Calendar shows 51 companies will report earnings today with BBY before the bell and GPS after the market close.

Action Plan

After a nasty opening gap down the bears seemed to have full control and continued to drive the market lower throughout the morning and early afternoon.  Then at 2:00 PM Eastern the FOMC surprised the market suggesting they were willing to allow inflation to rise above 2% sparking a sharp rally to close all four of the major indexes positive on the day.  If you feel your suffering from a little whiplash this morning, you’re not alone.

As I write this, the Futures are pointing to a flat open, but Economic new, and Earnings reports could quickly change that before the open.  With so much political uncertainty as trade negotiations, new reports send tremors through the market and facing a 3-day weekend I would not be surprised to see choppy price action with declining volumes after the morning rush.  Keep in mind that a lot of traders will likely extend their labor day with a few days of vacation.  Keep that in mind as you plan your risk into a holiday weekend.

Trade Wisely,

Doug