Monday kicked off the week to a solid start as volume increased over Friday’s level. It is summer trading, but good to see volume increase on the session. Financials led the day while Utilities were slammed. Big volume poured into both sector ETFs XLF and XLU. Small caps lagged the day, but the group has bounced off its 50-day moving average after experiencing selling at the end of June. We are ramping up towards another earnings season and it will be interesting to see how companies have performed at the start of our current trade disputes. Tariff talk has dominated the headlines as of late and it will likely be a part of many earnings releases. Of course, our focus will remain solely on price action. We’ll react to how this market moves on the earnings backdrop. We had a solid start to this week and given stocks are in a positive seasonality period there are some tailwinds for this market.
Given we are in earnings season we must be aware of our holdings earnings dates. There are varying schools of thought here. It boils down to risk tolerance and your ability to manage risk. Proper position sizing and exits will certainly help, but too large of a position or buying right before earnings is a recipe for disaster. For those with a bit of cushion in a stock it is fine as long as you have proper position sizing, but for most it is wise to be on the sideline as stocks report their earnings. Stick with a sound risk management protocol and avoid buying ahead of earnings. These techniques will help protect you from a stock or stocks blowing up as the report earnings. Protecting your capital is your primary job. Maximize your profit potential by not getting blown apart by earnings.
The overall market is looking pretty good here. We saw the Dow do itself a favor yesterday and bounce off key moving averages. Now, it should go without saying if we reverse and wipe out gains that would be bad. Of course we want to see the Dow continue to build upon its positive action from Monday. There are plenty of opportunities on the long side of the market here. Our New Positions page is full of new ideas each day. Our members are certainly benefiting from ignoring the noise and following price. If new long positions were getting beat up and we were seeing a lack of new signals we would be in a different place. For now, we appear to be ready to continue an upward trend. Our exit strategy has us protected from the downside and we’ll push forward.
We hope you have a great week of trading and make sure you enjoy your summer!
