Morning Market Prep | Stock & Options Trading | Jan 26 2018

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Focus on price action.

The last couple days of trading the bears have reminded us that they are still lurking about looking for weaknesses.  Even though their testing has not yet yielded much in the way of results, it’s been a good reminder to focus on price action for clues of their attacks.  It’s noteworthy that as the market continues to march higher, the VIX has slowly crept up as well.  As of now the bulls are in control, but there is a good reason to have a heightened awareness if the bears continue to test the battle-line.  Friday’s have lately been very strong, and I suspect the bulls will fight hard to do the same today.  As this bull run gets very long in the tooth don’t forget to take some profits to the bank.

On the Calendar

We have three important reports on the Economic Calendar this Friday all coming in at 8:30 AM Eastern.  The Durable Goods consensus expects a 0.6% gain with ex-transportation also seen up a solid 0.6%.  The Core Durable Goods orders are expected to come in at 0.5% which is also very strong.  Next, we have the first GDP estimate for the fourth quarter that is expected to decline just slightly to 2.9%  Consumer spending is expected to have a strong showing rising to 3.6%.  Then comes the International Trade in Goods deficit is seen narrowing slightly to 69.0 billion vs. the 70.0 billion in November.  After that, we have three additional reports that are not expected to move the market.

We get a little Friday break on the Earnings Calendar only showing 44 companies reporting results today.  Next week will be a very busy week with over 500 companies scheduled to fess-up on earnings.

Action Plan

Yesterday it was the DIA doing all the heavy lifting setting a new record high as a result of the great earnings out of CAT and MMM.  The SPY, QQQ, and IWM all decided to take a little rest yesterday that at one point threatened to slip south.  However, the bulls stepped in just before it became critical buying lifing them back into a safe zone.  Overall uptrends continue to hold, and the bulls remain in control.

The new normal seems to be that every day the bulls pump up the Futures markets and today is no different.  Currently, the Dow Futures are pointing to more than a 50 point gap up that could print above 26,500.  Both the QQQ’s and the SPY are also indicating the possibility of new record high prints at the open. What an amazing bull run!  Stay with the trend because it has without question been our best friend since the beginning of the year.  Remember Friday is a very good day to bank some profits ahead of the weekend.

Trade Wisely,

Doug

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