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Super Busy Week Ahead and Then Dead Calm

Posted by Pete Stolcers on July 26

Posted 9:30 AM ET – The market continues to flirt with the all-time high and it is expending a lot of energy. We have heard from “the best of the best” and mega cap tech earnings have not been able to punch us through. Apple will report next Tuesday and we will get the FOMC statement on Wednesday. The volume will drop after next week.

Earnings season will climax next week and the results have been good. Unfortunately, at a forward P/E of 17, great news is priced in. Amazon is down after reporting and Intel and Google are trading higher.

Investors are expecting a quarter-point rate cut from the Fed next week. Domestic economic conditions are good and this morning we learned that Q2 GDP grew 2.1% (1.8% expected). Employment is at a record high and ISM manufacturing/services are in expansion territory. The market is making record highs and the Fed has breathing room. I don’t believe they will signal another rate cut in September and the market won’t like it. I expect to see some profit-taking in August.

Face-to-face trade negotiations with China are scheduled for Tuesday and Wednesday. We can expect positive comments and that will be market friendly. Unfortunately, there won’t be any progress.

Swing traders should stay in cash. The first few weeks of earnings season is front end loaded and this is when you would expect a market liftoff. I believe we will see a pullback in August/September and we will buy at that time. Next week the action will be good. Earnings season will climax, major economic data will be released and the FOMC will cut rates. After a flurry of activity, the market will go into hibernation. Politicians will flee the capital (recess). I believe that at current levels the upside reward is smaller than the downside risk.

Day traders should watch for an early fade this morning. Opening gaps have retraced and resistance at the all-time high is stiff. Once support has been established, buy stocks with relative strength. In the chat room we are focusing on post-earnings plays and the action has been hot.

Next week will be super busy and then you should plan snap
some time off as we head into the summer doldrums.
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