Market Will Float To A New High This Week – Don’t Expect An Explosion

Posted 9:30 AM ET - Last week the market rallied from the 200-day moving average and now it is within striking distance of the all-time high. As I mentioned in my comments, the best trade this year has been buying dips. Unfortunately, we haven't had many. Stocks rallied 5 days in a row and for the first time in months I was able to hold onto overnight call positions. That was a good week and now I am reverting back to a hit and run approach. Greek banks opened this morning and that is bullish for European markets. Chinese stocks are reopening and less than 20% remain restricted. Rumor has it that China will lift restrictions this week and that would be bullish. Earnings season has been good. Netflix and Google knocked the cover off the ball last week and tech stocks have a strong bid. Apple posts Tuesday after the close, Amazon posts Thursday after the close and Facebook posts a week from Wednesday. This means we should still see bullish price action for the next week. The market will challenge the all-time high and a small breakout is likely. Don't expect much follow-through. The FOMC statement will be released a week from Wednesday. I don't believe the Fed will show its hand. Traders are expecting a rate hike in September and it is likely to be "one and done". Stocks are fully priced at a forward P/E of 18 and the threat of a rate hike will spark profit-taking on "rips". I don't see any speed bumps in the next week and we should have a choppy, upward bias this week. The economic news is light this week. Flash PMI's will be posted Friday morning. Sell out of the money bullish put spreads on stocks that are breaking through horizontal resistance after posting strong results. Make sure the short strike price is below the breakout. If the breakout fails, buy back the put spread. I believe stocks will be able to tread water near the all-time high through August options expiration. I will also be day trading. We don't have a market tailwind to lean on so I will be relatively passive on stocks that are gapping above a breakout. These plays need to settle down and there is a better entry point later in the morning. I do like stocks that are up slightly and have broken through horizontal resistance. These offer a much better entry point early in the day and I prefer to see a steady grind higher. Look for the market to float to a new all-time high this week. Don't expect an explosive move with follow through. Earnings season is in full bloom and there will be many individual stocks to trade this week. . .

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