Tickers discussed: SPY QQQ IWM FAAMG FB AAPL AMZN MSFT GOOGL XLC XLF XLI XLU XLV XLY Strategy update
The Weekend Profit Navigator provides a big picture stock market analysis for the week just past with a look ahead. Key levels and trading locations for the indexes are provided, along with trading plans and timely commentary to keep you on the right side of the trade.
The earnings rush continues. The balance of FAAMG keynotes the end of the week. Other notables. PFE, MCD, V, AMD, BA, SHOP, UPS, TDOC, GILD, XOM, CVX
What to watch for Next Week.
McConnell’s Phase 4 Covid Package:
- As the Republicans fritter away precious time wrestling among themselves, the match to the economy is burning with many of the covid programs set to roll off in the next couple of weeks. The Congressional August recess is already pushed back. Keep in mind that this is a Republican impasse. We are not even talking about negotiating with the Democrats. I stick to the believe that a deal gets done but the deal probably will be in the $1T – $1.5T sweet spot. That is still roughly haft of the first one. Everyone on benefits is expected to be getting a haircut. How much of one is yet to be determined
- Pumper in chief Powell will be doing all he can to signal accommodation. Listen for messaging on potential yield control measures. The bond market hasn’t been buying this equity rally nor the back-to-normal scenario as yiels continue to edge lower below 60 bps . Before long, I think you’ll see a test of the 50 bps range, maybe lower as it play out.
- In recent memory, the market has been a consistent fader of Powell. No matter what he says the market seems to move lower. Who knows, maybe he has a new program that will be announced that the market will cheer. Watch gold. All the money printing has been a tailwind. Gold is looking a little parabolic lately. Maybe Fed speak will give it another thrust to possibly put in a near term tradeable top.
Big Cap Tech Earnings
- The balance of FAAMG ( AAPL, AMZN, GOOGL, FB ) reports in the back half of next week. Tech in general has been soggy for 2 weeks. Reports from NFLX and INTC did not help. Goldman was out the other day with a note saying AAPL’s stock price was unsustainable. While some expect the usual ramp into earnings, I am favoring either continued sogginess or possibly even a fade into the print. There are many with huge embedded gains in these names. If you were someone loaded with gains, would you be inclined to book them or pray for a good reaction to earnings? If you wanted to get in, would you step in at these prices just before the print? Net, net, I think there will be more motivated sellers than buyers next week ahead of earnings.
Risk Off Assets flashing warning flags
- Risk off assets are flashing warnings signs. Bonds / TLT continue to run with yields continuing to fall since the Jun 8 High in stocks. They are not buying the back-to-normal / V recovery theme. Gold / Silver getting parabolic isnt a great sign for stocks. Fun Fact: Silver put in the best week in 40 years! Also something to keep on the radar is $USDJPY. THe dollar – yen currency pair has long been a read on RISK ON / RISK OFF flows. Higher = risk on; Lower Risk off. THe pair it pushing against key support. A break below 106 would not be a great sign for stocks.
- Early week I am favoring a drift lower in QQQ. Net, net I think there will be more sellers wanting to book profits than buyers wanting to step in ahead of earnings
- As far as Big cap tech earnings themselves, as usual, I plan to step aside. No edge, no trade.
- Will be watching risk off assets for clues. $USDJPY Dollar/ Yen currency pair; Bonds, Gold / Silver
- Collectively they are flashing yellow. If $USDJPY cracks below $106 coupled with a spike in bonds, metals and the VIX I’d be leaning bearish
- Bulls need SPY $323 to keep the bears from nibbling too much. If prices drop below $319 bears may get emboldened.
- Rotation to Value: There has been a pull back in growth in favor of value. I am not so sure it sticks. IWM needs to hold $145 and break above $150 to convince me. A break below $145 is bearish with a $3 gap to fill.
- Fiscal last chance: I think there will be some kind of fiscal stimulus by the end of July but it will be the last one before the election. How big or how far reaching remains to be seen.
- Politics: The election is 100 days out. There is historical precedent for a market sell off leading into the election if the incumbent is expected to lose. The factoid holds irrespective of which party is the incumbent.
- FOMC Meeting is always a wild card.
Here is a video covering the charts below and includes some additional comments and observations about the charts. The video is 30min
Sitting on it’s 50 ema. Nice pivot point for active traders. Below favors $221.71; above favors the 20ema at $237.50
Triggered a sell signal this week. Price below the 8 and 20emas. Got a nice bounce near the 50ema. Favor $353 before $370. Needs $385 to fully negate the sell signal.
Price dropped inside its channel. That favors a move to the low side of the channel. If that happens, I think an army of dipsters will be waiting.
To my eye, $202.50 is a key level. Below favors bears with 196.50 and 190 below as targets. Like AMZN, dipsters should be waiting for a back test of $190 to hit it.
No strong opinions. Needs $1525 for higher. Recently put in a divergent high. Nice rising trend below should be a good dip buy if we get there around $1450. Below 1425 favors 1350.
Key SPDR Sector Charts
GOOGL and FB are 44% of this index. A break of $56.50 favors a $2 drop to test the 50ema below.
60 min chart at resistance. Alarm 24.25 for a break above. For now, resistance is resistance until price can prove otherwise
$BA should make or break this one. Earnings Jul 29. A break above $73 sends it higher; $71.50 is support.
$XLK – Flashing a sell
Looking for a short term move to test the 50ema near $102 – 102.50
$XLU – At resistance
$XLV – Watch / Alarm $104
All about Amazon. 25% of index; Key off the 20ema and 1331.50
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