Posted by Pete Stolcers on April 28
Posted 9:20 AM ET – Yesterday the QQQ soared to a new all-time high while the S&P 500 treaded water. Tech stocks marched higher ahead of earnings from Google, Amazon, Intel and Microsoft. Good news was priced in and any surprise favored the downside. The overnight price action has been stable and the reaction was generally positive.
Google and Amazon rallied after the news and Microsoft was flat. Intel is trading lower and the server-side of their business disappointed. Tech stocks are flying high and day traders should focus on this sector. Apple will announce earnings after the close Tuesday and Facebook will announce after the close Wednesday. Once these mega cap tech stocks report earnings the excitement will wane.
The S&P 500 has been weighed down by energy and financials. These two sectors need to participate if the market is going to make a new all-time high.
The “optics” for Trump were good this week. His tax plan was well received, a government shutdown will be avoided, defense and border patrol budgets will increase and Republicans will try to pass a new healthcare bill next week. The issue is that the tax cuts will face opposition, Trump didn’t get funding for the wall and the healthcare bill will not be approved by the Senate.
I told you 2 weeks ago the focus would shift to earnings and it has. Buyers are engaged in the early part of the earnings cycle and the market tends to move higher. The S&P 500 is within striking distance of the all-time high but it has been dragged higher by tech stocks. We need to see a broad-based rally that includes financials and energy.
The Fed will lean on this market strength and they will hike rates in June. Although it’s not part of their mandate, they time rate hikes to minimize market impact. Hawkish statements from Fed officials could spark profit-taking in coming weeks.
Analysts are ignoring soft economic data and they are focused on future growth. Q1 GDP came in at .7% this morning and a weak number was expected. The market did not react to the release. Q2 GDP is expected to grow 3% and the next jobs report should see upward revisions.
Swing traders should milk profits from bullish put spreads. The market will try to tread water for another week and the S&P 500 could challenge the all-time high. However, once Apple and Facebook post results the selling pressure will start to build. Swing traders need to be patient. The market will pullback and fill in the recent gaps. When it does that there will be an opportunity to sell bullish put spreads.
Day traders should expect a quiet day today. Stocks have partied all week and buyers will not be very aggressive heading into the weekend. I will use the first hour range as my guide and my activity will be pretty light today.
I gave you a support level of SPY $238 yesterday and that was spot on. I will use that same level today. Resistance is at SPY $239.40. This range will hold today.
Look for a little more upside next week and signs of profit-taking after that.
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