Posted by Pete Stolcers on July 25

Posted 9:30 AM ET – Last week the market broke out to a new all-time high and it has been holding on to gains the last few days. This brief pause is gathering strength for the final leg of the rally. Earnings season will climax this week and the results have been good so far.

Google posted solid numbers, but the expectations were high. The stock is down 3% and it will weigh on tech stocks today. Facebook will post after the close on Wednesday, Amazon will announce after the close on Thursday and Apple will post results next Tuesday. Mega cap tech stocks have been leading the charge and they will keep buyers engaged.

The FOMC statement will be released tomorrow. I am expecting fairly hawkish comments as the Fed reduces its balance sheet and as it prepares the market for a December rate hike. I don’t believe the initial reaction will spoil this rally, but it will be a factor towards the end of August.

Republicans are scrambling to get enough votes for the healthcare bill before recess. This would calm nerves and it would be a small step in the right direction. The details and amendments would be hashed out when they return. If Republicans can’t make this happen investors will get nervous in a few weeks.

Swing traders should be long QQQ calls. Ride the momentum and use $143.50 as a stop on a closing basis. As your bullish put spreads “maxed out”, buy them back. The last few weeks have provided us with an excellent opportunity and you should be making great money. Once this rally runs its course we will be watching for signs of weakness.

Day traders should look for an opportunity to get long early in the day. Profit takers tested the bid the last few days and the gains from last week held. Buyers will get a little more aggressive and stocks should do well early in the day. Know that the action will slow down ahead of the FOMC.

We need to weather the FOMC speed bump tomorrow. Once the dust settles stocks should grind higher for another week. I plan to be out of my long positions by the middle of August and I will start scaling out when the next leg of this rally stalls.

Stay long and raise your stops. Be prepared to take a little heat in the next two days.
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