Now that the July 4th holiday has passed, the real fireworks may begin. Thirty minutes after the market closes today Alcoa announces earnings. Alcoa's earnings report is the traditional kickoff to each earnings season.
Various analysts have been preparing us with statements that Q2 earnings in general may be a significant drop from recent quarters. It is best to wait and see what the initial reports indicate, and how the markets respond.
With two lower volume trading days due to the holiday, especially at the start of the vacation season, we dare not make too much of recent chart patterns. But there are a few interesting setups in the major market indexes and ETFs that would be interesting to watch over the next week or two.
The S&P 500 has rallied, on below average volume, to the declining trendline formed by the June high. It is also the first close above the 50-day moving average in a couple of weeks. Will the S&P break above, or resume falling?
The NASDAQ Composite looks similar. The Russell 2000, representing smaller stocks, is showing slightly stronger action, having formed a horizontal line of resistance and just barely poking above it on Friday.
The Crude Oil index is barreling upwards. The common viewpoint is the price rise is because of the problems in Egypt and a drop in inventories. However, inventories were unusually high to start with because of strong domestic production. As Paulo Santos shows in a Seeking Alpha article, the rise in crude oil may actually be due to speculators. With earnings season beginning, energy stocks, and companies with high energy costs, may be major movers over the next few weeks.
Volatility has dropped off significantly from June highs. Protection for existing positions, in the form of buying protective puts, can make sense now. As far as new positions, the risk is higher, at least until we get a sense of how the earnings reports will go. Straddle trades, which are option trades that benefit on a strong move in either direction, can also make sense over the next several weeks. We could be in for some interesting moves during the normally-quiet summer period.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal-forecaster
Copyright (C) 2013 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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