Put two traders in a room, and one might scream to sell while the other puts in orders to buy. So who’s right? Well, they both could be—depending on the indicators they’re looking at and the kind of trading you want to do.
We’ve rounded up our InvestorPlace advisors to give you their read of the market as earnings season really kicks off next week.
Let’s get to the analysis:
John Jagerson and Wade Hansen, Slingshot Trader
As earnings season really kicks off next week, we expect investor sentiment to gel and the near term outlook to be much more clear than it is right now. Although we remain very cautious about the potential for a down-turn in the market, we only want to hold bearish positions in stocks that may move contrary to a bullish trend anyway. That includes mining stocks, poor fundamental performers, and stocks in groups currently rotating out of favor. Our holding term should continue to be relatively short and early exits before news events (when possible) should be prioritized.
Jon Markman, Trader’s Advantage and CounterPoint Options
We saw another nominal high on the Dow Jones this week—but the funny thing about math is that the higher the index goes, the less any single percentage point gain really means.
But no complaints here — our stocks went up just like everyone else’s. Upside momentum has been grinding up since last Friday, which means that bulls get the benefit of the doubt.
John Lansing, Parabolic Options, Trending123 and Power Trading at the Open
I believe we are seeing is a flight to quality from the money on the sidelines. The bond market is seeing that money, while the panic we saw early on was alleviated by the carry trade that continues to prop up this market. Said another way, the big money continues to be long the U.S. dollar and short the Japanese yen. The reason we can say this is true is the strong upside reversal especially in the Russell 2,000 Index (NYSE:IWM).
With that said, that up/down pattern day to day will break one day and it’s very possible the weekly outside bearish key reversal in the S&P 500 futures will trump any new money coming into this market.
Ken Trester, Maximum Options
Stocks shook off their jitters from a week ago and moved higher every day this past week, and signs point to the rally continuing. The trend will remain bullish provided the Dow stays above 14,290, the S&P 500 above 1535, and the Nasdaq above 3205. Those numbers represent each index’s 50-day moving average, and they have been rising as relentlessly as the indices during the past five months.
With the trend looking up, traders should favor call options and establishing put credit spreads, but show some restraint as this might just be a seasonable push from investors funding retirement plans ahead of the deadline. Balance new calls with some protective puts, especially because puts are relatively cheap now in light of the volatility that is near record lows.
If you thrive on this kind of back-and-forth market analysis, we’ve got something up our sleeves for you…the 24/7 Trader’s Talk Forum, coming soon.