Posted by Pete Stolcers on August 3
Posted 9:30 AM ET – Yesterday tech stocks shot higher after Apple posted better-than-expected earnings. As I mentioned in my pre-open comments that early gap was a great short. Tech stocks reversed sharply and they regained their footing late in the day. This is the third time that we’ve seen profit taking in tech stocks during the last two weeks and it is a sign that good news is priced in. The jobs report tomorrow is the last significant piece of news for a few weeks.
Earnings have been excellent and guidance is at its highest level in six years. Almost 3/4 of the S&P 500 companies have reported and 70% have beat earnings estimates. Valuations are not stretched.
Last week’s FOMC statement was fairly hawkish. As long as the market is marching higher they will continue to tighten (regardless of sluggish economic growth).
Our nation will be on autopilot while politicians are in recess. The healthcare bill and tax reform are in limbo. When politicians return the debt ceiling will be upon us. Their lack of progress will spark profit taking in a few weeks.
This is a low probability trading environment for swing traders and day traders. During this news vacuum we will see some of the lightest activity of the year. Traders typically take time off.
Swing traders need to be on the sidelines during this choppy period. An upward bias is likely but days of tiny gains will quickly be stripped away by one-day drops.
Day trading will be difficult as well. I will be more active when the market opens lower. It is easier to spot relative strength and I want to trade from the long side when possible. I will be inactive when the S&P 500 gaps higher.
Keep your powder dry and don’t piss your capital away trying to predict random wiggles and jiggles.
This will be a quiet trading day ahead of the jobs report. The number will be a nonevent and it will be in range (170K – 230K).
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