Hello Everyone,
Earnings season started last week, however it's this week when the big well known names start to report and continues in earnest into August. Just to name a few: (NFLX on the 20th, MSFT and TSLA on the 21st, AAPL and GOOG on the 27th, FB on 28th, AMZN 29th). Historically the market has generally held up during earning season and quite honestly if we were not in earning season I would be saying run for the hills! From the drought of good long setups from my scans for the past 2 weeks, the negative breadth, the glaring divergences in various indicators etc it's not surprising from the lack of good long setups and our overall cautionary tone. For example, the percentage of stocks in the S&P 500 that are above their respective 50 day MA is only at 48%. Also, Tom McClellan a well known market technician recently said he's on the verge of swinging bearish (we personally use many of his McClellan type Oscillator indicators). We also continue to see increased inflation, and some recent concern about rising Covid variants and possible lockdowns again. That said, the way I discuss all these things you would think that the market indexes would be way off their highs and down trending right? That's only the case for the Russell 2000 IWM ETF, which is well below its 50 day MA now and not too far away from its 200 day MA. The Dow Jones for examples is only 1 day off its highs, and the SPX 500 and Nasdaq are still above their respective 20 day MA's.
We'll see how the market reacts this week and the next two weeks - my thought is that if the market only has a modest sideways bounce over the next two weeks, that it will setup for a possible larger sell off afterwards. If the market can have a strong positive price reaction to earnings along with positive breadth, then these divergences can be erased.
enjoy the rest of your Sunday
Matthew Frailey
---------
No new DVT's
7/9: SPX daily DVT = 4260, SPX 2 day DVT = 4232, Weekly DVT = 4057
QQQ daily DVT = 347.6, 2 Day QQQ DVT = 344, Weekly QQQ DVT = 325.2
