Posted by Pete Stolcers on July 24
Posted 9:20 AM ET – Early last week the market made a new all-time high and it spent Thursday and Friday holding on to gains. Earnings season will climax this week and mega cap tech stocks are on deck. This will keep buyers engaged, but we will have to weather a speed bump (FOMC statement).
Google posts after the close today, Facebook announces Wednesday and Amazon will report on Thursday. Apple will not report for another week and it is the last of the mega cap tech stocks to report. The excitement will wane after Apple and that is when you should start taking profits on your long positions.
The Fed wants to raise rates regardless of economic growth. They won’t say this, but it’s true. If another financial crisis were to arise they would be painted into a corner with ZRIP (zero rate interest policy). They need some cushion and as long as the market is moving higher they will continue to progressively raise interest rates. Consequently, I believe the tone for this FOMC meeting will be relatively hawkish. This is the last meeting until September and investors will get a little nervous towards the end of August.
Politicians will be on holiday and nothing will get done in DC. This won’t be an immediate issue, but it will weigh on the market in a few weeks.
This push higher should last two more weeks. Swing traders should be long QQQ calls and they should use QQQ $143.50 as a stop on a closing basis. If the stop is triggered it will lock in nice profits. Swing traders should also buy back bullish put spreads that have “maxed out”. Given the recent market rally these positions should be making great money. Reduce risk, lock-in profits and released margin.
Day traders should try to get long early in the day. The market spent most of the day in negative territory on Friday and it rallied late. This is a bullish sign and I believe the downside is relatively contained today. Mega cap tech stock earnings this week will fuel a move higher. Oil is up this morning so the backdrop is good. If the market is above the first hour high you can get more aggressive with your longs. Use the first hour high as your guide.
The market still has a little gas in the tank. Ride your profits and raise your stops. The FOMC meeting Wednesday might force you to take profits on some of your positions when the stops are triggered. Let the remaining trades run and start scaling out after Apple reports.
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