Week-In-Review: Stocks Soar Ahead of Earnings Season

Byinfo@50park.com

Stocks Rally Ahead of Earnings Season

Stocks went from being overbought, to being very over-bought in a matter of a few weeks. The fact that the market refuses to fall in a meaningful fashion clearly shows you how strong the bulls are right now. Stepping back, it is important to keep a cool head and remain cognizant of the fact that the market is very over-bought and due to pullback. Buying up here, after a big move, is not prudent and it is a matter of when, not if, the market pulls back. The first important level to watch is the 50 day moving average for the major indices. The one negative divergence that showed up on my radar last week was that the semiconductor stocks ($SMH) fell while the broader markets rallied. Semis tend to be a leading group, so I will continue to watch them closely. Outside of that, the market remains very strong as we head into earnings season. Remember, in bull markets, surprises happen to the upside, not the downside. 

Mon-Wed Action:

On Monday, stocks ended mixed to slightly lower as the market paused to digest the Dow’s strongest start to a new year since 2006. Right out of the gate in 2018, the major indices hit fresh record highs and also broke above key milestones. The Dow, S&P 500 and Nasdaq closed above 25,000, 2,700 and 7,000, respectively. On Tuesday, stocks rallied sharply helping the benchmark S&P 500 to enjoy the best start to a year since 1987.
On Wednesday, sellers showed up in the morning but the bulls quickly stepped in and aggressively bought stocks. At one point the Dow fell about 100 points but rallied back and ended slightly lower by the close.  The fact that the market refuses to pullback, even from very over-bought levels, tells you everything you need to know about the market right now. This type of very strong action tends to occur near a market top, not near a bottom. So just keep that in the back of your mind as this very strong bull market ages.

Thur & Fri Action:

Stocks rallied nicely on Thursday after Delta Air Lines ($DAL) and KB Home ($KBH) both rallied after reporting stronger-than-expected quarterly profits. Stocks rallied on Friday after several of the big banks reported earnings, and most rallied on the news. Overall, earnings are expected to have grown by 10.6% during the fourth quarter, according to S&P Capital IQ. Remember, from my point of view, the most important factor to look at during earnings season is how the market and individual stock react to their earnings.

Market Outlook: Bulls Are Strong

The bulls are back in control and the market remains very strong. As always, keep your losses small and never argue with the tape. What’s Stopping You From Achieving Your Goals? Answer: Your Mental Blocks…Learn More Here

Similar Posts

  • Quiet Day On Wall Street

    Byinfo@50park.com

    Market Action-Confirmed Uptrend
    The market is back in a confirmed uptrend after a modest (and healthy) -6% correction from its post-recovery highs. We find it very bullish to see the mid cap S&P 400 index hit a fresh all time high and the small cap Russell 2000 index flirt with its all time high. in addition, the Dow Jones Industrial Average vaulted to a fresh post-recovery high and the S&P 500 and Nasdaq composite are just shy of fresh 2011 highs! Finally, we are very happy to see a slew of high ranked stocks trigger fresh technical buy signals in recent weeks which suggests higher, not lower prices lie ahead. If you are looking for specific help navigating this market, please contact us for more information.
    Have you seen the “Wise Money Library”?
    Now, All In One Place, A Collection Of Strategies, Techniques and
    Resources That Professional Traders and Investors Use
    Have a Look: www.WiseMoneyLibrary.com

  • Stocks Bounce Off Support

    Byinfo@50park.com

    Market Outlook- Market In A Correction:
    The market is back in a correction after another failed follow-through day on Tuesday, June 21, 2011. Now that we are back in a correction, defense remains the best offense. The next level of support for the major averages is their respective 200 DMA lines and then their March lows. The next level of resistance for the major averages is their respective 50 DMA lines. Trade accordingly.
    For those of you that are interested, the S&P 500 hit a new 2011 high on May 2, 2011. Two days later, on Wednesday, May 4, 2011, we turned cautious and said “The Rally Was Under Pressure” (read here). Then on Monday, 5.23.11, we changed our outlook to “Market In A Correction” (read here). On Monday, June 6, 2011 we pointed out that the S&P 500 violated its 9-month upward trendline (read here) and reiterated our cautious stance. On June 21, 2011 we changed our Market Outlook to a “Confirmed Rally” after the latest FTD was produced. Two days later, on Thursday, June 23, 2011, our outlook changed to “Market In A Correction” after the market sold off hard on renewed economic woes. If you are looking for specific help navigating this market, please contact us for more information.
    Stock Market Research?
    Global Macro Research?
    Want To Follow Trends?
    Learn How We Can Help You!

  • Stocks Fall As Economy Weakens

    Byinfo@50park.com

    The technical action in the major averages continues to weaken. Currently, resistance for the Dow Jones Industrial Average and the benchmark S&P 500 index is their respective 200 DMA lines, while the Nasdaq Composite faces resistance at its 50 DMA line. It is also disconcerting to see the action in several leading stocks remain questionable as evidenced by the dearth of high-ranked leaders breaking out of sound bases. Thursday’s action wiped out the gains enjoyed earlier in the week for the major averages which emphasizes the importance of remaining cautious until the rally is back in a confirmed uptrend. Put simply, we can expect this sideways/choppy action to continue until the market breaks out above resistance or below support (recent chart lows). The first scenario will have bullish ramifications while the second will be clearly bearish. Trade accordingly.

Leave a Reply

Your email address will not be published. Required fields are marked *