Thursday, June 21, 2018

Stock Market's Allowed A Down Day?

The stock market's been down this week and I'm here to say, that's ok. Markets are allowed down days and even down weeks.

Let's not lose sight that the NASDAQ, thanks to tech fundamentals has been breaking out to new high after new high.

Trade war fears need to be respected but we have a game-plan for that. Let's review.

Down Days Are Ok

Market... Down days are ok and normal and apart of life. You're good enough and you can do it. You're fundamentals are getting better. You just have some macro headwinds but you'll survive.

Jobs are strong, rates are low and revenues and earnings are accelerating.

But What Do I Do About A Trade War?

First, let's see what happens. If countries keep raising the size of their tariff target lists then the market's going to stair step down.

If not, then the market is going to likely trade back and forth until we get some other news to push it.  What news is that?  Earnings.

So unless we have worse figures bigger than the $200B threats, let's hold the course.

What About Earnings?

Based on our work calling a ton of tech companies we'd guess that Q1's acceleration can continue into Q2 and that the guides can be strong for Q3.

No company would know about any negative impact of a trade war, not yet.

So if we are right about tech companies there is good reason to believe the NASDAQ can keep marching higher. That should support the rest of the market.

SPY Line In The Sand

The news media is going to be tough sporting a ton of threatening headlines.
Source

Let's draw a SPY line in the sand to keep things simple.

There are a few things on this chart.

First we drew some arrows where the S&P 500 ETF SPY (NYSEARCA:SPY) chart had some major action.

That line is 271.

Above that line, I think it's easy to stay bullish. A close below that line would make me potentially more neutral. So we'll let the market tell us what it wants to do.

As for the brown line in that chart, that's the NASDAQ (NYSEARCA:QQQ). Wow right?  That is a beautiful uptrend.  We don't want to mess with that uptrend. Let it work. We'll use SPY's 271 to decide on both but we want to give that beautiful uptrend as much chance to continue.  It can do it.

The stock market has ignored a lot of bad news until this week. But the market's also allowed to have some down days and down weeks. It's normal and it's healthy.

Lastly, in the chart above we circled the last time the market had a weak close like it did today. It's been a while. The market is allowed a weak close every once in a while.

Tech Fundamentals Strong

We'd remind you that FANG stocks and other major tech stocks are all seeing accelerated revenue growth.  Intel today confirmed that trend with an upside preannouncement. It's good out there.

We speak to many companies each quarter and we'd guess this quarter can be similar to what Intel just announced.

Conclusion

The market is allowed down days. Fundamentals are very strong. It would be nicer if Trump and Xi make nice. In the meantime let's use our 271 SPY line in the sand.


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All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We are only long QQQ of the stocks mentioned here.

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