Not out of the woods just yet.

The bulls went to work on Friday providing very nice relief rally, but the markets are not out of the woods just yet.  The big move in AAPL fueled by the huge share purchase by Waren Buffett helped the QQQ’s break above it’s 50-day moving average.  However, all four of the major indexes are still in technical downtrends with significant price resistance levels above.  Although the Futures are pointing to a bullish open, keep in mind that after such a big 2-day rally some profit taking would not be out of the question.

The market has a lot to chew on this week with trade negotiations, nuclear deals, North Korea and about 1400 earnings reports.  Price volatility is likely to remain high, and big whipsaws or reversals are not out of the realm of possibility amidst the new spin cycle.  I’m rooting for the bulls to win this battle but I will also have a plan if bears regain control and everything starts moving south.

On the Calendar

A quiet day on Economic Calendar for a change.  There are three bond events, the TD Ameritrade IMX, Consumer Credit and three Fed speakers none of which are typically market-moving.

On the Earnings Calendar, there are 219 companies reporting quarterly results.  Today begins the last big week of this earnings season with around 1400 companies reporting.

Action Plan

Friday’s big beautiful bullish follow through was a very welcome site and was quite broad-based.  The tech sector turned out the be the biggest winner after the news that Warren Buffett when on another spending spree in AAPL shares.  That boost propelled the stock price to new record highs and due to its heavy weighting in QQQ pushed the ETF’s price above the 50-day average.

Unfortunately, the DIA and SPY remain under the 50-day average which means the bulls have a lot more work ahead of them.  Keep in mind the indexes still have a lot of overhead price resistance to deal with, and all four indexes are still in down trending patterns.  I wouldn’t expect the bears to give up easily and with the Dow, over 700 points off the low printed on Thursday, some profit taking is not out of the question.  The good news is that currently, the Dow Futures are suggesting a positive open.  The bad news is that the Dow will have to rally more than 230 points to test the 50-day averages and more than 550 points to break the lower high resistance.  Possible yes, but a tall order when you consider China Trade negotiations, a North Korean talks, and the Iranian Nuclear deal that could easily present stumbling blocks.

Trade Wisely,

Doug