Earnings continue to be a focus for many as gains continue to pile on for the market. End of the day selling did sour gains a bit, but we were still able to close positive. Volume was lower on the session as summer trading continues. Leading stocks continue act well including our 4 horsemen continue to act relatively well. We have yet to see any blemishes outside of the final hour reversal. Tech earnings are in full force kicked off by GOOGL stellar performance. QQQ are certainly in the nose bleed section and with AAPL and MSFT set to report tomorrow the ETF could push even higher. This market continues to work in our favor and it paid to listen to our price signals.
If we had to nitpick this market we certainly would point to XLB and IYT. These two ETFs should be pushing higher if the underlying economy was humming along and a great clip. Unfortunately, neither one of them are pushing higher. Both are in downtrends and need to find a way to push higher. Aside from XLB and IYT the next two ETFs HYG and JNK are certainly not showing confidence in the high yield market. The high yield market typically is an indication where the general stock market will head. However, there is quite a divergence between QQQ / SPY and HYG / JNK. Whether or not these 4 ETFs are foreshadowing something more sinister will be made clear with price action. Stick with the trend and for now XLB, IYT, HYG, and JNK are in downtrends.
Perhaps even more damning are the prices of commodities. Commodities are in the decline and pointing to deflation. DBA, DBC, GLD, SLV, and USO are certainly not painting a picture of inflation. The wild card to all of this is certainly the US Dollar. UUP is in a bullish setup and looking to print higher prices. It should be interesting to see how this all plays out and whether or not Yellen and the Fed raise rates. We believe they are locked in a corner unable to raise rates any time soon. Time will tell.
Tomorrow evening we will get earnings from AAPL and MSFT. Tonight we saw IBM report less than stellar numbers. Negative year-over-year growth in earnings and revenues is not a good situation to be in. IBM was down more than 5% in after-hours trading. We have zero insight how the market will react to AAPL or MSFT earnings. AAPL followed thru last week’s punch through the 50 day moving average with some volume today. While MSFT tries to push off its own 50 day moving average. Big moves in the same direction from these stocks will certainly push the QQQs in a big way!
There is always something to worry about regarding this stock market. The key to it all is to simply focus on price action. A sound risk management approach and exit strategy goes a long way to incredible results.
