So far the week has been very bullish with the market switching directions on a whim. Have you adjusted with the market?
It is apparent that investment sentiment has changed over the past few trading days. The most recent sell-off was very short lived. Partially to blame has been earnings reports that have not been as terrible as feared. Positive reports from Netflix and from the US discretionary spending bellwether, Harley Davidson, helped wrap up five days of gains for US equities. Traders seem to be jumping into the popular momentum stocks that brought equity markets to all time highs. The buying has been so strong that in the past five days only one sector had a negative return; the metals and mining sector. That sector’s lack of gains is a reflection on the sentiment (or lack of) about gold.
The bullish sentiment will be tested when earnings from a range of stocks fills up the rest of the week. The stocks range from speculative names like Pandora to more conservative names such as Colgate Palmolive.
Economic data for the rest of the week is light. Wednesday will bring the UK Bank of England interest rate decision and policy statements; Thursday has the European Central Bank (ECB) president’s speech, US Durable Goods, US weekly jobless claims, and Japan Consumer Price Index.
Given the light economic calendar expect to see traders try to guess at economic conditions from the earnings from companies such as UPS and Caterpillar. Earnings will play a larger role this week with Apple and Facebook on Wednesday; Amazon, Caterpillar, Microsoft, Newmont Mining, Pandora, UPS, and Visa on Thursday; Colgate Palmolive on Friday.
The SPY ETF, which mirrors the S&P 500 should find a home between $184.80 and $190.80 by the end of the week.
The market has proven to be fickle and so should your commitment to any trade or position.
Good luck and trade rationally.