Before the Bell July 19

Tickers discussed: SPY QQQ IWM FB AAPL AMZN GOOGL MSFT NFLX TSLA  Strategy Session

Before the Bell  is premarket prep for active traders. The note provides detailed stock market technical analysis focused on the indexes and FAAMGs. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.

Earnings 

Companion Video 

The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed.  Run the video at 1.25x to reduce run time.

Find the Video  HERE

 

Macro Data Releases Week of July 19

  • Monday – Housing Index  IBM after the bell.
  • Tuesday – Housing Starts ; Redbook
  • Wednesday – Oil inventory; 20 yr Bond Auction
  • Thursday – Jobless Claims, Chicago Fed. EIA NatGas Inventories,   KC Fed.   10 yr TIPS Auction.
  • Friday – Flash PMI

Consolidation or Correction?

We are in an important transition period. Too early to tell if this is consolidation action or the beginning of a deeper correction. Mega-cap tech reports next week. If they sell the news, you’ll see sharp moves at the index level.  Oscillators are extended to the downside so a tough place to pile in short. I am in a neutral posture. Long TLT and not much else.  If this is a consolidation we will have time to get back long. If correction, we will be able to find objective entry points. Be defensive, be tactical.

Reasons to Pay Attention – UPDATED

  • Post July OPEX – Typically there is elevated volatility coming out of a monthly OPEX.  Yellow Flag
  • Trendline Violations:  Both QQQ and SPY violated their uptrend lines and dropped below their 8ema and are testing the 20emas.  Breaks below the 20ema and traders should definitely get defensive with their positioning.
  • Bearish Divergences:  They’ve been persistent for months. Now though, because prices have violated trend lines, the bearish divergences will take on more significance. Seasonality.  Mid to late Summer seasonality leans bearish.  Earnings season reactions will play a big role. From now thru Labor day, lots of people will be going on vacation. If you thought volume was light in July, you’ll be checking SPX for a pulse in 2 weeks. Potential for outsized swings with no one home.
  • FOMC –  Meetings at the end of July and Jackson Hole in August. Potential Fireworks with taper signaling
  • Debt Ceiling:  Lawmakers go on vacation in 2 weeks with debt ceiling looming. These things dont matter until they do.
  • Breadth Stinks:  FATMAAN has lead this narrow advance with only 42% of SPX stocks above their 50ema.
  • FATMAAN Earnings:  TSLA and NFLX report next week. THe others the following week. If earnings reaction is lower, the broad market averages are going lower. It’s just math with FATMAAN like 25% of the index.  If earnings resolve higher, we go higher.
  • Earnings at Large:  Bank earnings have been greeted with a thud. Lots of reporting over the next several weeks. Expectations are high with the potential of see the news.
  • Semis – THe group is a risk on / off indicator and the price action stinks. Off nearly 3% yesterday and with 2 failed breakouts in as many weeks.
  • Small Caps – IWM is usually also viewed as a risk on/ off group.  It’s rolling over.  Bulls would like to see it stabilize and reverse but we may need to go to the bottom of the range.
  • Oscillators – NYMO / NAMO Have entered oversold conditions making fresh short positions a relatively low risk-reward trade.
  • Sentiment:  Not many bears out there.  Fund managers are already all in.  Short interest is nearly at record lows. There wont be any air breaks if they pull the rug.
  • FED LIQUIDITY: They are still pumping and that’s bullish
  • Treasury General Account Drawdown:  The Treasury has added about a trillion dollars of liquidity over the past 3 months by drawing down their general account. Their target is a $500B balance. That level will be achieved in 2 weeks. Then that spigot gets turned off.

I hope that is enough reasons to pay attention.  Watch and Listen closely. Be in a position to move once we get resolution.

FATMAAN Earnings

July 20:  NFLX    July 26: TSLA       July 27: GOOGL / MSFT      July 28: FB / AMZN / AAPL

Breadth Stinks but the Oscillators are Oversold 

The $NYA50R shows that less than 40% of NYSE stocks are above their 50 dma.  The rolling bear market under the surface is here. That said, look at the oscillators. THey are entering oversold territory. There is room for them to move lower, but odds favor at least a bounce coming.  This is the perfect set up to suck in a bunch of shorts just in time for a bounce. THe prediction game is fraught with peril but from my experience you dont want to mess with NYMO. As you can see from the historical record we are at a location where a reversal comes sooner than later.

 

Equal Weight SPY Rolling over

The Equal Weight SPY is already testing the 50ema.

A Simple Bull Market / Bull Stock Checklist

Being a fear-monger is popular. Bearish tweets and doomsters are more widely followed than a tweet saying “stay long”.  Use this simple checklist to tell if the market or a particular stock you follow is in bull mode.  THe list is not intended to be the end-all checklist, but if you find  yourself saying yes to most of the questions, you can certainly come out from under your desk and delay subscribing to “Doomsday Prepper” magazine.

  1. Is Price at an All-time high?  All time highs are bullish, not bearish
  2. Is price above the 8ema and 20ema?  Price above the fast moving averages is as bullish as it gets
  3. Are the ema’s bullishly stacked? if from top to bottom the 8 is above the 20, 20 above the 50 and 50 above the 200 tells you the trend is higher and in bull mode.
  4. Is the slope of the moving averages positive?  If the moving averages are tilted positive and rising; its bullish
  5. Have any trend lines been violated?  Draw a trendline connecting the lows of the recent trend. As long as price stays above, its bullish. If a trendline is broken, pay closer attention.
  6. Are the indicators operating in their bullish regimes?   If RSI is above 50 and PPO momentum is above the zero line, the indicators are bullish.

Use these simple questions to ally any fears you have about the market or favorite stock but confirming it’s bull market status.

INDEX CHARTS

A detailed walk-through of the levels and trading strategy for the indexes is given in the video ( link above) . The static charts are provided for reference. The FATMAAN names are also reviewed in the video along with trade ideas and other charts of interest.

SPY 2 hour

SPY 30 min

QQQ 2 hour

QQQ 30 min

IWM 2 hour

$IWM 30 Min 

 

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