It was another volatile week on Wall Street. Stocks ended flat as investors digested a slew of earnings reports and the bulls showed up and defended the longer term 200 DMA line. The major indices opened the week with a big selloff and then the bulls showed up right on cue and defended the 200 DMA line and stocks bounced back in the latter half of the week to end relatively flat to slightly lower.
So far, earnings remain strong but a lot of that was already priced in so we are seeing a somewhat sluggish reaction on Wall Street. In the short term the 50 DMA line is the next area of resistance to watch while the 200 DMA line is the next area of support. Stepping back, we have to expect this sloppy sideways action to continue until one of those important areas are broken. From where I sit, the market looks like it wants to rally from here it is just taking a break to digest the very strong two-year rally we just enjoyed. Stay tuned, because a lot more earnings are slated to be released over the next few weeks.
Mon-Wed Action:
Stocks were very quiet on Monday as investors waited for a busy week of earnings to be released. Stocks fell over 500 points on Tuesday even as earnings remained mostly positive. Separately, the yield on the 10-year treasury note topped 3% for the first time since 2014. Caterpillar Inc. (CAT) gapped up nicely after reporting earnings but the stock fell during the session. Alphabet Inc. (GOOGL) fell nearly 5% after reporting earnings, even though the company beat on both the top and bottom line. Tuesday’s action came after the major indices failed to trade above their declining 50 DMA lines, which is not a healthy sign.
Stocks were quiet on Wednesday as a slew of mostly stronger-than-expected earnings were released. Big stocks such as The Boeing Company (BA), Twitter, Inc. (TWTR), Facebook, Inc. (FB), QUALCOMM Inc. (QCOM), AT&T Inc. (T), Visa Inc. (V), eBAY (EBAY), and Ford (F) were some of the well-known names to report numbers. Elsewhere, the benchmark 10-year Treasury yield traded at 3.03%. Investors are concerned that higher rates may slow the economy and hurt companies’ ability to buy back their own stock. The fact that the bulls showed up and defended the longer term 200 DMA line (once again) is a bullish sign.
Thur & Fri Action:
Stocks rallied nicely on Thursday after the bulls showed up and defended the longer term 200 DMA line on Wednesday. Investors also digested a slew of earnings data from Amazon (AMZN), Microsoft (MSFT), Intel (INTC), and several others reported earnings. Stocks were quiet on Friday after the government said the U.S. economy grew by 2.3% in Q1 2018, which beat the Street’s estimate for 2%. Stay tuned, because a lot more earnings are slated to be released over the next few weeks.
Market Outlook: Bulls Are Fighting
The market is trading between important resistance (2018’s high) and important support (February’s low). Until either level is broken, I have to expect this sloppy, sideways action to continue. On the downside, the big level of support to watch is February’s low and the 200 DMA line. For now, as long as those levels hold, the longer-term uptrend remains intact. Conversely, if those levels break, look out below. On the upside, resistance is now 2018’s high.
As always, keep your losses small and never argue with the tape. Want 1-0n-1 Coaching Lessons From Adam? Click Here To Learn More
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