Insipid

If you listen to the financial news, they blame yesterdays 300 point Dow selloff on Trade War jitters.  Okay,  if that’s the case what changed midday to cause the rally that recovered the entire selloff to close the day up 5 points?  If I were to define the price action in a single word, it would be Insipid, (no vigor).  The bulls are certainly lacking vigor unable to find buyers even on strong earnings reports.  And although we are in a current downtrend, the bears also seem lacking conviction allowing intraday whipsaws and reversals to occur almost daily.

The fact is after the unprecedented run up last year that overpriced the market this is a very normal process of trying to renegotiate prices.  Admittedly it’s extremely frustrating and very challenging to trade.  With the DIA and the SPY holding on to their 200-day averages yesterday I would love to say it now over but honestly I don’t think that true.  Although we may get a relief rally, I think the chances of difficult price action through the summer months is a high probability.  The good news is money can still be made with good technical analysis and selective stock picking.  The big intraday swings will eventually diminish, and the technical analysts will rule supreme.  There may be fewer trending stocks to choose from, but the quality of a trade is always more important than quantity.

On the Calendar

Only one market-moving report and a parade of Fed Speakers for this Friday’s Economic Calendar.  Before the bell at 8:30 AM Eastern we will get the very important Employment Situation report.  Consensus expects the April nonfarm payrolls grew by 191,000 in April with the unemployment rate slipping 1-tenth to 4.0 percent.  Average hourly earnings will tick up by only 0.2 percent with the yearly rate holding steady at 2.7 percent.  The forecast also expects manufacturing payrolls to post solid growth of 15,000.  The workweek is seen unchanged at 34.5 hours with the labor participation rate coming in flat at 62.9.  The oil rig count is at 1:00 PM and there are 7 Fed member speaking engagements throughout the day to close the calendar week.

On the Earnings Calendar, there are 95 companies expected to fess up to their results today.  Next will is another huge week of earnings with around 1400 expected reports to keep us on our toes.

Action Plan

No matter how if you were a bull or bear yesterday was frustrating because the market does not seem capable of holding on to a direction for an entire day.  The Dow dropped 300 points in the morning and then rallied about the same in the afternoon.  After all that movement it ended the day flat.  A frustrating whipsaw to be certain.

The good news – The DIA and the SPY ultimately held the 200-day-average and printed a Hammer Candle Pattern.  The bad news – A Hammer Candle Pattern requires follow-through, and currently, the futures are pointing to gap down open.  Couple that with the fact the bulls have not been able to find buyers even on great earnings reports it tough to believe in them enough at this point to toss caution to the wind and buy this low.  With the weekend coming and the news whipping up trade war fears it might be wise to exercise some caution.

Trade Wisely,

Doug