Posted by Pete Stolcers on July 14
Posted 9:00 AM ET – Yesterday stocks took a breather after a nice run. The S&P 500 hasn’t moved much in the last two months and it is within striking distance of the all-time high. All of the action has been in tech and the QQQ has rebounded nicely. Buyers are scooping up these stocks ahead of mega-cap tech earnings in the next two weeks.
JPM beat the top and bottom line estimates but the stock is down 1.5%. Wells Fargo and Citigroup were also down after posting results. Financials will be a drag on the market today and big banks will be reporting all next week. The price action suggests that good news was priced in.
Earnings season really won’t crank up for another week. Buyers will be trying to get long and any dip will be brief and shallow.
China posted solid trade numbers yesterday and they will post industrial production, retail sales and GDP on Monday. These data points should be good.
Janet Yellen’s testimony before Congress was fairly dovish this week. She suggested that easy money will continue for quite some time. Other Fed officials have said that they want to see inflation tick higher and they want to see stronger economic growth before they hike again. The market likes this rhetoric and stocks are floating higher.
Politicians are scrambling to pass a healthcare bill before recess, but the progress is slow. We will hit the debt ceiling in October and healthcare is accounts for 1/6th of our economy. Tax reform and tax cuts won’t happen before a healthcare bill is passed. This will NOT be a concern for the next few weeks, but it will be in September.
Swing traders should be long QQQ calls. Raise your stop to $140 on a closing basis. You should also be short out of the money bullish put spreads. Every day that the market floats higher these positions benefit. You have more breathing room and time decay is working in your favor.
Day traders should focus on the long side. Energy stocks are up and financials are down. The two sectors should negate each other. Focus on tech stocks. Let the market find its footing and scale into long positions. After the first hour of trading use the high as your guide. As long as the market is above it trade from the long side.
I’m expecting positive price action for the next two weeks. Once mega cap tech stocks have reported the excitement will wane and it will be time to take profits.
Support is at SPY $243.30 and resistance is at $245. The S&P 500 will challenge the all-time high today.
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