Everybody Has a Plan ’till They Get Punched in the Face

Mike Tyson famously said, “everybody has a plan ’till they get punched in the face.” I heard this phrase before, but found it amusing when it was mentioned on CNBC this morning, of all places.

Most new traders do not have a plan in affect when things go wrong. On the contrary, many “react” by taking no action at all and as a result, suffer debilitating losses or worse, may blow up their accounts.

Members have been gradually scaling out of positions over the past couple of weeks. As the markets print fresh all time highs, day after day, it made sense to reduce risk. As circumstances dictate, we now have political tensions hitting the tape. In response, many high flying stocks were taken down a notch midday. The FANG stocks are all lower in pre-market trading as well.

Despite the political saber rattling, the markets are still near all time highs. As we mentioned over the past couple of weeks, a pullback to intermediate support is less than 2%. If price action pulls back to 244.00, we would likely see a bounce. If that does not happen and we move below 244.00, the next level of support is roughly 4.33% off the Tuesday session high 248.91.

SPY

Note the PSAR (dots under price) sell signal or stop at 246.79 will be triggered this morning. 244.00 is the potential downside target short term. This is major “intermediate” support and correlates to the rising 50sma.

Earnings and the Plan

With 445 S&P 500 companys reporting 2Q17 thus far, 73% have topped EPS estimates on +11.6% growth. 70% have exceeded sales estimates on +6.3% growth. This is very solid news, so I suspect TICK cumulative in the above chart will continue to rise. And, the FED is supportive of the current market trend.

That said, its prudent to be taking less risk at this time. By this I mean, smaller positions and perhaps shorter duration trades. Consider taking profits intraday on early winners (Trade of the Day setup) and keep swings for fewer days, or not at all. In addition, consider some hedging or protection.

It is with the latter in mind that we will consider some added bond exposure short term, if the markets show persitent weakness today.

Happy Trading from The Closing Print,

Vinny



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Vinny Gambini

Trade Fundamentals w/ Technical Analysis - CANSLIM method using high probability setups and Ichimoku Trend Analysis. Architect, Family Man and Father of three.