Weekly Market Wrap-up
Sunday - July 23, 2017
Another week ends as the markets continued to churn higher... big surprise. There was a little weakness in the DOW (you can thank IBM and GS), but it was more than offset by the strength in the Nasdaq as well as the S&P.
As far as the S&P goes, 2500 seems a given sooner rather than later. The rally continues unabated, although, I would not be surprised to see a much needed 5%+ correction beforehand to shake out some bulls and give bears false confidence. I say false confidence because I believe that even if we pullback hard (2280-2330 in Aug/Sept), we would still be in a massive up-trend and likely end up going much higher (2600+ in 2018).
Complacency in the market seems to be a popular topic lately, for good reason. The overall trading volume is low, while the VIX is at/near all-time lows once again.
Upcoming week (July 24-28, 2017):
S&P - 2480 seems key as it is likely the next upside target. If any bearishness emerges this week 2440-2450 will most likely hold it.
Bear (pun intended) in mind, Trump Jr and Manafort are set to meet with Senate Judiciary Committee members (although the public testimony has been delayed) this week, which could set off some weakness and blow out stops on the downside (if only for a moment) before what is likely a quick rally back up to new highs, as is often the case nowadays. My own personal thoughts on that are basically this. The market is setting all these dip buyers up for an epic slide, as one of these days those bids won't be there and the dip buyers will finally be forced to sell lower and lower as the market cascades down and down and down. Most bears will likely not benefit as they'll take profits way too early. With that said, the odds favor buying the dip (just place a decent stop so as not to get caught on the day "it" finally happens).
Nasdaq - It's all about FANG earnings. As I'm sure most of you know, we already had Neftlix last week (complete blowout to the upside on subscriber growth). Next is Google on Monday (after the close) followed by Facebook on Wednesday (after the close) and last but not least, Amazon will give their latest update on world domination on Thursday (after the close).
So how much is actually priced in? If you go by Netflix, apparently, not nearly enough. While I don't expect to see that type of upside on the remaining 3 FANGs, upside seems likely, though, not necessarily, as Microsoft (a fellow tech heavyweight) actually sold off a bit on great earnings. Since I tend to focus on the Nasdaq 100, the levels I'm watching are as follows.
6000 on the upside if FANG stocks continue their epic climb and 5800 on the downside if they sell-off on earnings. That would be a healthy pullback and put us back to the Dovish Yellen gap-up from July 14th.