12:40pm (EST)
Our charts from last night were showing more upside potential following last week’s break out of the “symmetrical triangles” and the test to the 100-day MA’s (moving averages). Strong moves out of these technical patterns to the upside or downside usually lead to back tests and that is what we are seeing following Monday’s bottom.
The technical view can be skewed by the news because the talking heads are praising the Fed Heads that have talked up the market by saying the Fed could add even more liquidity to pump up the markets, cough, we mean the economy. While today’s comments have helped the bulls, the Fed believes it can control the market but in reality it can’t. Last week’s violent pullback was no joke and shows how things can quickly get out of hand.
Today’s gains have pushed the indexes back into their prior trading ranges and we have been saying 2Q earnings will have a big impact on how the market trades for the rest of the summer. A close above the 50-day MA’s this week would favor the bulls for a possible push to new highs in July. The bears will need to hold the 50’s and keep the action near the bottom of the trading range in order to make another push at the 100-day MA’s again.
Tomorrow is month end for the market and the quarter end for companies. We have seen volatility increase to 2-year highs and the bulls are looking for a hat trick if they can get another win today. Friday should be interesting as the fireworks could start early with the indexes pulling off their highs as we head into the second half of trading.
The Dow is up 85 points to 14,995 while the S&P 500 is gaining 9 points to 1,612. The Nasdaq is higher by 25 points to 3,401. The Russell 2000 is up a 12-pack to 975.
We could have a Profit Alert later this afternoon for our Weekly Wrap on a trade that is up double-digits with the company reporting earnings tomorrow. The newsletter is a “safer” way to play stocks and options and our goal is to return double-digit profits on a monthly basis. While there is a chance to squeeze a little more juice out of the trade, we are weighing our options as there is another trade we like that takes the risk out of keeping the other trade open over the earnings announcement.
There are also some trades from our Daily Watch List but we are being careful not to open too many trades until there is a clear breakout or breakdown. Getting caught in trading ranges can be frustrating and we identified the one that was coming in May for much of June. Last week we predicted a major move in the indexes and the test to new lows. We also said there could be a possible back test to previous support levels and we will use the charts to continue to help us navigate the choppy waters. In the meantime, we will try to take profits when we can.
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