China’s Economic Data Was Good – Banks Soft Ahead of Earnings

Posted 9:30 AM ET - Stocks are poised to move higher this morning after solid economic data in China. Citigroup is down after posting results and earnings season has officially started. Expectations are high and stocks are trading at the upper end of their valuation range. China's GDP rose 6.2% and that was in line with expectations. Retail sales came in strong at 9.8% (8.5% expected). Industrial production was 6.3% and that was much better than the 5.2% that was expected (industrial production only rose 5% in May). These better-than-expected numbers will keep global recession fears at bay for another month. US/China trade negotiations are taking place via teleconferencing. That tells me that it is not worth the time for anyone to get in a plane and that no progress is being made. The Fed is expected to cut rates in two weeks and that is priced in. The focus has shifted to a September rate cut. Earnings season will begin today and big banks will dominate the scene this week. At a forward P/E of 17, the expectations are high. Investors will be paying particular attention to Q3 guidance. The news cycle is fairly light for the next week. Earnings will be in focus and there should be some nice trading opportunities within the overall market. Swing traders should remain sidelined. The gains each day have been marginal and the upside rewards are smaller than the downside risks. The global economic undertow is strong and earnings growth will slow this quarter. Tax cuts 18 months ago fueled much of the rally and the comps will be harder to beat. Mega cap tech stocks are leading the charge, but the rest of the market has been sluggish. Day traders should ride the momentum. Wait for the bid to be tested this morning and look for opportunities to buy stocks with relative strength. Intraday price action has been compressed so keep your size small and your trade count low. We will be looking for earnings plays in the chat room this week. There will be much of a market tailwind, so we need stocks was heavy volume. I suddenly lost another family member Sunday and I will not be posting market comments Wednesday. . .

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