After briefly breaching 29,000 with a very narrow large-cap leadership, Friday’s price action ultimately left behind bearish engulfing candle patterns while still solidly holding onto bullish trends. With earnings season kicking off on Tuesday with big bank reports, the expected signing of the Phase 1 trade deal on Wednesday, and a busy economic calendar, traders will have to be ready for almost anything. In such a strong bullish run, it's easy to become complacent, but with stocks trading at such high multiples, that would be unwise. Plan careful, and never forget the market can quickly shift direction.
Asian markets closed green across the board last night as they await the signing of the Phase 1 trade deal. European markets, however, are trading cautiously this morning with indexes flat to mostly lower focused on developing geopolitical tensions with Iran. US Future this morning seems to be tossing caution to the wind pointing to a gap open. With Friday’s bearish engulfing pattern, be very careful chasing into this morning gap.
On the Calendar
On the Earnings Calendar, we have just 12 companies reporting results but there is only company SJR that’s particularly notable today. However, keep in mind 1st quarter earnings season kicks off on Tuesday with several big bank reports.
There was a very interesting weekend of news with talking heads issuing very contradictory predictions of the future direction of the market. Protestors hit the streets in Iran after the government admitted to downing the Ukrainian 737 passenger plane. The President has come out in support of the Iranian protestors noting their courage is inspiring. At the same time, the Iranian leadership continues to threaten additional retaliation. Scheduled for Wednesday this week is the expected signing of the Phase 1 trade deal with China, that’s to provide some protection for US intellectual property as well as large Ag purchase commitments from China.
With markets already at very high multiples and expectations of slower earnings growth, reports indicate that GS, BAC and other large investment banks are advising their clients to move assets to a more passive dividend collection strategy as they expect only a 2% market growth in the coming year. At the same time, others are suggesting 2020 could be a solid earnings growth year and projecting substantial market growth. I think all the contradiction would suggest that no one can predict the future and the best we can do as retail traders is to setaide our bias, focus on the charts, and price action within. Up, down or sideways price action will lead the way to a profit.