Signals & Trading Plan for Thursday 7/11/19

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Powell launched Surge6 
By now you already know what happened with Fed Chairman Powell today, but just to sum it up quickly: “Mr. Powell’s testimony before the House Financial Services Committee signaled that the Fed is likely to cut rates later this month. Minutes from the Fed’s June meeting were also released Wednesday, and showed many central bank officials saw a stronger case for a rate … Federal-funds futures, used by investors to bet on central-bank policy, show a 27% chance that the Fed will cut rates by half a percentage point at its July 31 meeting, up from 3.3% yesterday. The odds of a quarter-point cut stand at about 73%.” - WSJ

We wrote yesterday that Surge6 was coming, but perhaps we would see a bit more selling with Dip5 first.  Well, Powell’s testimony successfully launched $SPX $NDX $RUT into Surge6 immediately instead.  

Before we dive into to discern the under-the-hood messages from market internals, let’s digress a tiny bit and ask ourselves “Could we have foreseen this surge today?” 
Nah!

Betting on the outcome of Powell’s comments today, or the outcome of the job report on 7/5, or the outcome of the G20 meeting on 6/28 is just rolling the dice.  We are not in the business of rolling the dice. Our job is to identify the underlying messages from the market and do what it says.

Market internals have been sending out messages since 6/3 that the Up Trend that started on 12/26/18 is still intact.  Market internals have also been saying there’s no imminent threat of a major Pullback like the one in May either. So while there have been Dip4 and Dip5, they haven’t exactly been that big or that long.  

You know that old saying that you heard from your parents and teachers:  “Don’t just sit there.  Do something!”  In this case, what market internals have really been saying all along is this:  “Don't just do something.  Sit there! ”  Enjoy the ride up.   Don’t try to jump in and out on these little dips.  You will end up missing most of the ride.  Market internals will give us advanced warning when major Pullback2 or a new Down Trend is about to happen.

Market internals 
The collective message from volatility ($VIX $VXN), market breadth (NYSE NASDAQ A/D lines), and the buy/sell cycle indicator (CBOE equity put/call ratio) is this:
...

The rest of this article covers:
Market internals (more)
$SPX $NDX $RUT support and resistance zones during Surge6
Trading plan
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