Buy Calls – Market Breakout – Told You To Buy Yesterday
Posted by Pete Stolcers on July 18
Posted 9:30 AM – Yesterday the S&P 500 probed for support early in the day and it reversed instantly. Buyers scooped stocks and a bullish engulfing pattern resulted. The S&P 500 broke through a critical horizontal resistance level and the price action should be bullish the rest of the week.
Last week the NASDAQ 100 made a new high and tech stocks are leading the charge. Netflix plunged after posting earnings Monday and the drop did not dampen spirits Tuesday. Tech stocks reversed immediately and the NASDAQ 100 made another all-time high. Until all of the mega cap tech stocks have reported – the market will grind higher.
The economic news is light the next two weeks. This afternoon the Beige Book will be released and it will reveal solid growth across all regions.
Powell’s testimony before Congress reaffirms the Fed’s desire to tighten. They see strong economic conditions and moderate signs of inflation. This hawkish stance did not deter buyers.
Europe and Japan signed trade agreements and they mutually reduced tariffs. Perhaps this will pave the way for US trade negotiations. Next week an EU delegation will come to the US to discuss possible trade deals. There are no meetings scheduled with China, but Mnuchin and his Chinese counterpart will both be attending a central banker meeting in Argentina next week.
Earnings season will kick into high gear next week. The results have been excellent so far and profits are expected to grow 21% year-over-year. Banks are starting to move higher and they are the key to the next leg of this market rally. Transportation stocks are also catching a bid. We need to see rotation into other sectors. The market rally has been very concentrated this year (AMZN, NFLX, MSFT, FB, AAPL, GOOG).
Swing traders are long QQQ. Raise your stop to $178 on a closing basis. The next two weeks should be very bullish now that the S&P 500 has broken out.
Day traders should buy any weakness early in the day. Bullish markets open on the low and they close on the high. Support is at SPY $280 and you can lean on that level (buy stocks as long as we are above it). Resistance is at the all-time high.
The news is light and we have major technical breakouts. Momentum will carry us higher and earnings season will fuel the move. This is a high probability trading environment and I suggest increasing your size.
Market commentary provided by OneOption, LLC a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.