Striking distance of 25,000

In the last 7-days of bullish price action, the Dow has recovered more than 1200 points and is now once again within striking distance of 25,000.  The questions now, do the bull have enough energy to punch through or will be bears defend this important psychological level as resistance.  The IWM is less than 1-point from making record highs, and the QQQ’s would only have to rise about 3.5 points to do the same.  Earnings continue to come in strong, and there are several big reports this week can certainly have the potential of moving the market.

We also have several big economic reports to consider this week and the likelihood of Trade Negotiations news adding in some nervous volatility.  So this week brings the bullish possibility of new records and bearish potential that the bears could defend price resistance.  With the Futures indicating a gap up open watch for the possibility of whipsaws as we get close to price highs.

On the Calendar

A light day on Monday’s Economic Calendar with only two Fed Speakers and three bond events which are unlikely to move the market.  Keep in mind that Retail Sales number are out Tuesday and Wednesday brings Housing Starts and Industrial Production numbers.

The Earnings Calendar for 2^nd quarter earnings begins to wind down this week, but Monday and Tuesday are still full days of earnings reports.   We have 188 companies reporting results today.  Although it’s winding down, there are still some big reports through the week such as DKS, HD, M, CSCO, WMT, and CPB.

Action Plan

If big earnings reports, retail sales numbers, and housing starts were not enough to focus on the market may also have politically generated trade jitters to deal with this week.  Speaker Ryan has imposed a Thursday deadline to complete the renegotiation of the North American Free Trader Agreement.  The new agreement is largely expected to be market positive, but according to reports completing their work by Thursday’s deadline may not be possible.  Also, trade negotiations between the U.S. and China are scheduled to begin this week, which obviously has the potential to create some market shock waves.

Currently, futures suggest a bullish open with the Dow gapping up more than 50 points.  On Friday the Dow closed within striking distance of 25,000, but I would not expect this resistance to break easily.  After a 7-day winning streak, don’t be surprised to see some profit-taking or price consolidation to begin at any time.  The IWM is close to an all-time-high breakout, and the QQQ’s are also nearing price highs.  If the bulls have the energy, it is also possible to see some new records set this week as long as the political news doesn’t upset the apple cart with trade jitters.  Although I took some profits and hedged some positions last week, I will remain bullish until the price action tells me otherwise.  There are a lot of very nice charts to choose from but be careful not chase.

Trade Wisely,

Doug