Solid Earnings and Momentum Will Be Fighting FOMC Headwind

July 21, 2017
Author: Peter Stolcers, Founder of OneOption

Posted 9:15 AM ET - The market is hitting some resistance as it moves into uncharted territory. Mega cap tech stocks are starting to post results and that will keep buyers engaged. However, the FOMC meeting next week will provide a headwind. Microsoft posted good results yesterday, but the earnings included a tax gain. The guidance was a little soft and the stock is flat after the number. Google posts Monday after the close, Facebook reports Wednesday after the close and Amazon reports after the close on Thursday. Apple is the final mega cap tech stock in my opinion and it reports a week from Tuesday. Earnings reports will climax next week. The FOMC statement will be released Wednesday. Given the recent market rally I believe the Fed will not mince words. The tone will be fairly hawkish and they won't worry about spooking the market. This is the last Fed meeting before September and investors will get nervous towards the end of August. The healthcare bill is stuck in "the swamp". DC will be in recess and nothing will get done as usual. This will start to weigh on the market in a couple of weeks. We have one or two more weeks of positive price action. You should be ready to take profits when Apple reports earnings (or sooner). Mega cap tech stocks have accounted for huge portion of the market rally and once they announce the excitement will wane. This has been a very light volume rally. Swing traders should be long QQQ calls. Trail your stops higher and lock-in profits. Use $143.50 as your stop on a closing basis. If your bullish put spreads have "maxed out" buy them back for a nickel. Lock-in profits and release margin. Day traders need to let the market come in this morning. Relative strength will be easier to spot when stocks open lower. Once support is established, scale into long positions. Sellers will test the bid this morning and they want to gauge how aggressive buyers are. If the market is above the first hour high you can get a little more aggressive with your longs. Use that level as your stop. Support is at SPY $246.50 and $246. We should see a bounce after a lower open today and the market should grind higher Monday ahead of GOOG. Tuesday we could see some profit-taking ahead of the FOMC and a small relief rally after the statement. The price action will be a little choppy as stocks try to advance next week. . . image

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