Dear Trader,

Does Jerome Powell have the Chops to go off the top rope Volcker style to bring us back from the edge?

Does he even need to?

Today I talked about the interesting situation the Fed finds themselves in and how the bond market is supplying the fuel driving stocks higher.

Here is what you need to watch while Mr. Powell tries to bring us back to earth.

Next Week’s Earnings Tour

We are officially out of the gate in terms of the companies that everybody looks for during earnings. The financials were the first to come, then the big tech companies everybody lusts over. What comes next?

Next week there are over 1100 companies looking to report, the way I look at it there is only about 600 that will have any importance. The list stays long but there is something important that changes about that list week to week.

As the list grows heading into the third and fourth week we get a better idea of what is really happening in the market. We start to get a more substantial cross section of the economy.

This is a small subsection of the earnings reports next week that I’ll have my eye on. More specifically the ones in green are the ones I’m planning on trading

There are some that I’m going to keep a very close watch on like Caterpillar for example. This earnings report will give us an overview of how the global economy is doing just based off the amount of equipment people are buying.

We also have companies like SBUX, CVS, TIM and GILD. The point I am trying to make with this chart is, these are all companies from different areas of the market. Next week is the first week that the movement in the earnings picture isnt necessarily going to result in a 2-3% move in the Nasdaq 100. It’s no longer just the top 45% of companies in the Nasdaq 100 that are going to be hogging the headlines, we are shifting to the cogs of the machine we call the stock market.

Let’s take a look at the ones I’m planning on trading here:

  • BABA

With earnings announcements on the horizon we saw BABA break that round number of $100. Any time you see a stock the size of BABA break those hole number barriers youll start to see the analysts get involved trying to pump the stock back up. You have some of the bigger names such as Bernstein, JP Morgan, Goldman Sachs and a few others reiterating their bullish outlook on the stock.

We are looking at a 20-day about to cross over the 50-day trading below a bearish 200-day moving average. The Bollinger bands will need to come together a bit more before we start to see any big volume events take place, but the stock is teetering on its bottom Bollinger Band.

  • AMD

Technology is coming to the center of next week with only a few reporting AMD being one of them. They have been riding the coattails of the semi-conductor play recently. AMD also is going to see some benefit from the chips bill that was recently signed into law. Watch for a little bit of upside from this stock, in recent years they have done an excellent job of beating expectations.

  • PYPL

This is a stock that hasn’t been on our radar for some time now. They are set to come out with earnings on the second as they continue to ride the rail of their top Bollinger Band along with the rest of the FOMO stocks. It’s also pulling closer to an overbought stock but I’m not going short on the stock ahead of earnings unless there is a few signals on the chart that lead me that direction. I’d rather wait and see the market go nuts and just pick it up on the way back down.

  • BP

We are seeing the oil companies start to rattle around a bit and start to move back higher. The energy sector is acting a bit odd right now unless you are looking at something gas related. Along with this I’m looking at companies such as PSX, that’s struggling to really take off, UNG which is trying to level off, and SWN. All of these companies should be on our radar to grab when the time is right

  • ABNB

This company is really starting to see a bit of pressure on this company as more and more business people are going to the large flag hotels like Marriott and Hiltons. Vacation season is starting to come to a close and people are not traveling as much. If you don’t believe me go on the app youll see there are a lot of places that are vacant that typically would be filled right about now.

That is how I’m trading next week. If you have questions feel free to put them in the chat next week. If you want to take out the guess work give Gabe a call there’s still time to get into (877) 212-9163

The “Goldman Sachs Calendar”

Monday is the beginning of the new week for the financials based on the earnings trend.
The financial sector tends to get a rally for the 10 days following Goldman Sachs kicking off earnings even when the world around them is burning. We are on day 8 right now and we are starting to see the slowdown happen in companies like BAC.

As we move into august we will continue to see the market stay flat. Over the last 20 years it’s been up 50% of the time which is just a coin flip. At the lows, August has been down 8% and highs are up about 4% but don’t expect much from this we have to look at the market momentum to push it one direction or the other.

Cincinnati Financial

Cincinnati Financial is the group that gets the check every week. They are a property and casualty company. To keep it short you are always going to pay that bill when it comes in, regardless of everything else going on.

They came out with earnings and boy was it interesting. They followed the miss with an outlook that is Poor at best. Unlike the rest of the financials this is insurance keep an eye on companies like CB and PGR they are in the same sector that has been looking like they could get rocked even though they are trying to pull up a bit just like the rest of the industry.

Insurance being an outlier today being up 1% things are still moving a bit sideways. But CINF is a different story. The stock dropped from about $113 yesterday to $97.
Does this mean the stock is a bit of a buy because of what is going on in the financials? The XLF has been doing extremely well as of late so the stock is just undervalued and poised to follow the trend, right?

Probably not.

As we move into august we will continue to see the market stay flat. Over the last 20 years it’s been up 50% of the time which is just a coin flip. At the lows august has been down 8% and highs are up about 4% but don’t expect much from this we have to look at the market momentum to push it one direction or the other. Once we find that trend we will be ready to jump in and pull that money off the market.

Talk soon,

Chris Johnson
Quantitative Specialist, Penny Hawk


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