Ride Your Calls – Here Comes the Market Breakout
Posted by Pete Stolcers on July 24
The market is climbing a wall of worry. investors are focused on earnings and the announcements are ratcheting up. Almost 90% of companies that have reported so far have exceeded estimates. Potential trade wars and saber rattling with Iran have not deterred buyers. Major indices have broken through major horizontal resistance and upward momentum will build this week.
Asset Managers are under allocated and they will be scrambling to get long this week. Investors pulled money out of the market ($22 billion in mutual fund outflows in June. The most in three years) and they will be plowing money back in on the breakout.
Profits are on pace to grow 21% year-over-year and the S&P 500 is trading at a reasonable forward P/E of 16. We are seeing sector rotation and financials are moving higher as central banks prepare to tighten. Energy and retail sectors have a bid. Industrials continue to lag and any improvement would provide a big boost to the market. MMM is down 2% this morning after posting results. MSFT was strong last Thursday and GOOG was strong last night. Facebook will report after the close Wednesday and Amazon will report after the close Thursday. Apple will post results next Tuesday.
Swing traders are long QQQ and SPY. We will move our stops up to $179 and $279 respectively on a closing basis. This is the breakout we’ve been waiting for and I’m expecting a strong rally the rest of the week. As the market moves higher we will raise our stops.
Day traders need to tread cautiously during the first hour. Opening gaps up to a new relative high have been faded this year. We need to make sure the gains hold. If prices are steady after an hour of trading we will rally the rest of the day. Look for opportunities to get long and lean on support at SPY $280. As long as we are above that critical level I will trade from the long side.
Sit back and enjoy the ride.
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