July 17, 2018
Posted 9:30 AM ET - The market is in a holding pattern just below major resistance and earnings will be the catalyst that pushes us through. The rally this year has been very concentrated and mega cap tech stocks have been leading the charge. Other sectors have been lagging due to trade war concerns and they have plenty of upside. Look for the S&P 500 to breakout this week. Netflix is down 14% after missing its subscriber growth projections by a wide margin (1 million). The stock has rallied 33% in the last quarter and it was priced for perfection. Netflix is a unique company and the news is not going to taint the outlook for the entire tech sector. Microsoft will be a much better indicator when it posts after the close Thursday. Banks dominate the early part of the earnings cycle and the financial sector was strong yesterday. Economic growth is robust, unemployment is low, hourly wages are increasing and interest rates are on the rise. These are all positive influences for this sector and it should provide a springboard for the market. The economic releases are pretty light for the next two weeks. The IMF is maintaining global growth projections at 3.9%. Trumpnado hit Europe and traders have become numb to his tweets. Earnings are in focus and under allocated Asset Managers will get nervous if the market breaks out. They will not want to miss the next leg higher and they will scramble to get long when we breakout. The price action should be strong for the next few weeks. Swing traders are long the NASDAQ 100. It will take a small hit today because of Netflix. Lower your stop to $177 on a closing basis on QQQ. I'm expecting excellent earnings in the tech sector and the bid will remain strong until the last mega cap tech stock has reported. Day traders should wait for support this morning. Buy the dip and look for opportunities in the financial sector. Earnings announcements will climax next week. Profits are expected to grow 21% year-over-year and valuations are reasonable at a forward P/E of 16. The news will be good and the market will breakout. Stay long. . .
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