Will resistance hold or break?

Yesterday’s bullish move looks as if it will be followed by another gap up bring the both SPY, QQQ’s right back to last weeks resistance.  The question is, will resistance hold, stopping the Bulls advance or will it break?  To say the least, this kind of price action is tough to trade, and what makes it worse it’s dripping with emotion and drama.  There is an old saying that, Fortune favors the bold.  For some that’s true, but history rarely writes catchy sayings for those that lost their heads during their bold attempts.  Keep in mind it’s not necessary to trade every day to be successful.  Choose your battles wisely.

On the Calendar

We begin Tuesday with the biggest report of the day on the Economic Calendar at 8:30 AM Eastern.  Retail Sales number have disappointed all year but today consensus expectations for today are looking for a 0.3% vs. the 0.2% decline last reading.  Also at 8:30 we will hear from the Empire State Mfg. Survey and Import/Export Prices.  Consensus for the manufacturing number is to remain steady at 9.8. Import/Export prices are expected to increase by 0.1% vs. the 2% decline last month.  At 10:00 AM both Business Inventories and Housing Market Index release results.  Forecasters are calling for 0.4% gain in June for Business Inventories and a 65 reading in the Housing Index.  The Treasury International Capital number rounds out the day at 4:00 PM.

On the Earning Calendar, there are more than 30 companies reporting today.  Retail numbers will be the theme most of this week.  Home Depot reported very early this morning beating both the top and bottom line as same store sales increased, but as of now, investors seem unimpressed.

Action Plan

The Bulls made a strong showing yesterday gapping the market higher and managing to hold it above the gap all day.  Currently, it would seem the Bulls would like a repeat performance with the Dow futures suggesting another gap up of nearly 50 points.  That brings the SPY and the QQQ’s right back up into the congestion zone they were having trouble with as the Dow pushed higher just a week ago.  If you’re confused as to what to do, you’re not alone.  Price action such of this is very difficult to trade.  Traders that step in boldly might get richly rewarded however they may just as easily punished for chasing into price resistance.  Tough decisions to be sure.

Over all trends continue to be up so to follow my rules and trade with the direction of the market I will be looking for long trades.  However, I will not rush in after another gap.  I will wait and watch and enter only if the timing is right and the price action confirms.

Trade Wisely,

Doug