Market High Should Be Tested Next Week – Focus On Post-Earnings Plays

If you want to see what I'm trading today - take the FREE TRIAL Posted 10:10 AM ET - The market posted nice gains yesterday and it is down this morning. I've been mentioning all week that this option expiration would be dull. The SPY is near the all-time high and resistance is stiff. We don't have a catalyst to push us through this week, but earnings releases next week could do the trick. The strongest companies announce early in the cycle and optimism will build. After this first wave of releases, we should see some profit taking. Guidance will be cautious and minimum wage hikes, bad weather and a strong dollar will hurt profits. Traders will discount the news initially, but it will gradually take its toll. Stocks are trading at a rich forward P/E of 18. Global money printing has pushed yields down to historic lows and equities are the only game in town. Consequently, any decline will be relatively brief. Greece has to raise a lot of money in the next month and if it gets booted out of the EU, this could spark additional profit-taking. I'm expecting the low end of the range to be tested in May. Once support is established, it will set up a buying opportunity. I believe that Grexit will ultimately be bullish. This default will not surprise anyone and the credit risk is relatively contained. This will send a message to other EU members that they need to honor their fiscal commitments. I welcome the day when Greece is no longer in the headlines. To recap, I believe the market will challenge the highs in the next week or two. Profit-taking will eventually set in and we should test the low end of the range in May/June. That will set up a nice buying opportunity this summer. I don't see anything that is going to move us out of this trading range. When the market tests one extreme or the other, we need to trade the reversal. Global economic conditions are slipping, but stocks are attractive relative to other investments. This creates natural selling pressure at the all-time high and a strong bid at the low end of the range. I am finding some great opportunities in individual stocks. When the market is trapped in a range, this needs to be your focus. If you want to see what I'm trading, take the free trial. Log into the website and click My Stocks. You will see a list called Pete's List. I update this every day and I'm looking for stocks that have recently generated a buy signal and that have strong technical set-ups. During earnings season I will also be looking for companies that reported higher revenues and profits year-over-year and that declined on the news. These stocks are typically good candidates for a snapback rally; they simply got ahead of themselves. Once they are on my radar I wait for a buy signal from my trading system and then I add them to Pete's List. Anyone subscribing to 10 or more symbols will also have access to this list. I encourage subscribers to check this list daily and to view the charts. If they see something they like, they can swap one of their old symbols for a new one. This process only takes a couple of minutes each day and it ensures that your list always has the hottest stocks. If you want to see what I'm trading, take the free trial or sign up for 10 symbols. The price action in the first hour has already slowed down. Look for a choppy day with a slightly negative bias. . .

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