Earnings Season Adds a Little Spice to the Markets

It looks like we are rolling into the second big week of Earnings Season with a flat tire. A number of Dow components and other big name companies reported last night and this morning. Watch for AXP, MMM, PFE, CAT, and DD to really push the Dow around today. In addition, TXN and SNDK are roiling the Naz pre-market, and LMT, SGP, COH, USB, and BIIB all reported. This is just the kind of volatility I was expecting today, which is why I didn't hold any calls overnight, as usual.

Pre-market futures are down, and the market is likely to gap down a bit. That doesn't mean we will finish the day in the red, but I'm shortening everything that I do today and watching for clear intra-day signals before taking positions. If the market shakes off the gap-down out of the gate during the middle of the day then it might take a shot at the resistance zones I drew for you on the weekend posting. If we start making lower highs and lower lows out of the gate then the market will probably finish the day in the red. Like I said, expect volatility today.....

6:00 pm MT: Market Wrap: The Dow dropped 231 points today and it was still a consolidation day! That's how crazy our market has been lately. The price action on the Dow and the SPX was actually the narrowest range on the markets in the past 9 days! Don't get caught up in the price drop, I'm going to lay out tomorrow for you - and what to watch.

But first things first.....Today played out in a back and forth seesaw just as I anticipated. I warned that volatility was going to increase today, but it came in the form of back and forth whipsaws and not in the form of a big price range. Earnings Stocks facilitated the Bump and Dump intra-day price action. Here is an example of the Earnings Stocks: Buying on AXP, MMM, COH, and SNDK helped repair the gap down this morning, and selling on LMT, FCX, DD, and CAT helped the Bears fade the gap and dump the market into a bearish close. Stuck in the middle of the back and forth selling were stocks like TXN.

I didn't get a chance to really have fun with the intra-day swings today because of work obligations, which can be frustrating for us all.....However, I did do something I DON'T DO 99.9% of the time and that's buy something right before earnings.....But AAPL just kept fading and fading and fading all day and I just couldn't lay off the concept that traders were killing the stock way, way too much. So I took a very small call position on some out of the money options that I would'nt lose much money on if I was wrong. Again, normally I don't do an earnings carryover trade, but I made a rare exception today.

As for the overall market, the Dow and the SPX qualify for an NR7 Day (narrow range in the past 7 days), which sets up beautifully for a short term Break and Swing to either support or resistance tomorrow. It's most likely going to be a move to resistance because of the next bit of earnings news.....

Here's what matters next: AAPL beat earnings after the close and is trading up about $12 - $13 points after-hours. YHOO beat expectations and is trading up over 5% after-hours. BRCM beat expectations and is trading up almost 9% after-hours. CREE beat expectations and is trading up over 6% after-hours. And QLGC beat expectations and is trading up almost 4% after-hours. Get the picture? The Naz is probably headed for a gap up tomorrow morning. In addition, NSC beat expectations and is trading up almost 6% after-hours. Now, we have BA, BHI, T, COP, EMC, GD, GENZ, KMB, MCD, MRK NTRS, NOC, WLP, and WB announcing earnings in the morning, so the gap up tomorrow is still hanging in the wind. But if tonight's trend continues tomorrow morning, and the futures are up pre-market, then the NR7 will probably resolve itself to the upside.

Here is a chart of the Dow showing the NR7 and the short term consolidation within the swing (inside the blue dotted lines) that may resolve itself tomorrow. A move up probably moves the market to the resistance zone and a move down probably moves the market to the support zone. Even a move to the middle of the s/r zones after a break of the dotted lines will be a nice intra-day swing:
(click on image to enlarge)


Here is a chart of the SPX showing the NR7 and the short term consolidation within the swing (inside the blue dotted lines) that may resolve itself tomorrow. A move up probably moves the market to the resistance zone and a move down probably moves the market to the support zone. Even a move to the middle of the s/r zones after a break of the dotted lines will be a nice intra-day swing:
(click on image to enlarge)


Here is a chart of the Naz showing the short term consolidation within the swing (inside the blue dotted lines) that tried to resolve itself to the downside today. A move up or gap up tomorrow morning probably moves the Naz right back to the blue resistance zone, and a break above the blue zone may clear the way for a nice move up to the 1,900 area. A drop below today's lows clears the way for a possible move down into the low 1,600's:
(click on image to enlarge)

Here are some recent Bullish Movers that I will keep an eye on if the market gaps up at the open: AXP, MMM, COH, AAPL, and NSC. I still like most everything from my previous couple of days of Bullish Movers except Retail. In addition, the Q's, SPY, and DIA will be in play tomorrow. It may be that we get a mirror image of today during tomorrow's trading. Today was a gap down with a pop back and then a fade into the close. Tomorrow could be a gap up with a little fade during the morning and a pop into the close. But again, we have to get through the morning's earnings.....As always, we shall see.....