Dec 11th 2014 – Mind The Gap

Today was a good example of why I do not sell into a panic.  I prefer to get out at the open the following day.  Often the best trading concepts are the ones that may not make obvious common sense at first.  The idea being that we can often expect a gap open recovery the next day after a panic.  In my testing, it has shown up over and over and grabs back a little of the losses from the previous day’s fall.  This is exactly what happened this morning.  We have no way of knowing what will happen next, but statistically speaking, over a series of trades, it pays to “mind the gap”!

Additionally, today was a reversal of a reversal of a reversal, then it reversed!!!  What a fickle lot we human beings are.  We had a sell-off on Tuesday only for it to recover strongly and print a bullish reversal hanging man candle. This marginally reliable bullish signal failed and a major selling day happened yesterday followed by a quick recovery today…that was quickly sold into the close.  This is why I don’t like relying or trading on candlestick patterns…they fail all the time!

The current trend is in no man’s land right now, stuck between a high and a low.  But I think we may see further weakness before a new all-time high can be put in.  Today was a wild ride with more volatility ahead I think.  Keeping my powder dry till the path clears.

Market News:

U.S. stocks advanced on Thursday, cutting weekly losses, but euphoria over increased retail sales in November faded as oil fell to another five-year low and renewed worries of a government shutdown.

Stocks finished far off session highs, with Wall Street starting to dial back gains after crude dropped below $60 a barrel, and the pullback escalated amid efforts to block a spending bill in the House, sparking worries of the government closing.

Figures from the Commerce Department had retail sales rising 0.7 percent last month, the largest increase in eight months.

After the stronger-than-expected retail report, the National Retail Federation told CNBC its forecast “is right on track” for a 4.1 percent sales growth this holiday season.

Separately, the Labor Department reported fewer Americans filed unemployment claims last week.

Speaking at a conference in New York on Thursday, Treasury Secretary Jack Lew called lower energy costs an unquestioned positive for the U.S. economy.

On the New York Mercantile Exchange, oil futures for January delivery fell 99 cents, or 1.6 percent, to $59.95 a barrel, it’s lowest since July 2009. Gold futures for February delivery dropped $3.80, or 0.3 percent, to $1,225.60 an ounce.

Friday:

8:30 a.m.: PPI

9:55 a.m.: Consumer sentiment

News Sources:  CNN Money & CNBC