Life is 10% what happens to you and 90% how you react to it.
- Charles R. Swindoll
We have an interesting technical setup as reports start to roll in next week. The S&P 500 is at the top of its three-week long trading range and is showing some inclination to attack overhead resistance at the 2700 level. There is plenty of tough overhead to deal with and the action in many individual stocks has been choppy but there seems to be a willingness to shrug off worries about Syria and China trade. Market players want to buy and are more focused on buying weakness than selling strength.
It is highly likely that if the US were to bomb targets in Syria over the weekend that the dip buyers would be fast to act on a pullback. Any weakness on Syria concerns would likely be viewed as a buying opportunity.
The China trade issue is more complicated but the market has already bounced back after headlines last night that President Trump has decided to aggressively pursue tariffs and other restrictions. A number of pundits have commented that it was wrong to view President Xi's speech this week as having a conciliatory view but the market has acted like it believes otherwise.
The trade issue is likely to be a key theme in second quarter earnings reports. Management will be asked to gauge its impact on future results and the potential there for some negative views is quite high. We will also hear quite a bit about the impact of corporate tax reform and projections for the economy in the second half of the year.
In addition to bank earnings this morning we have news of a big stock buy-back from Broadcom (AVGO) which is boosting the chip sector. That is going to be a very key group in the next two weeks and will likely be a leading indicator for the indices.
Yesterday's market strength was largely index driven as market players tried to quickly put money to work in liquid vehicles as Syria and China trade concerns softened. I had mixed action on my screens in individual names and was disappointed with the stock picking that I saw.
There are markets that are index driven and there are markets that are driven by individual stocks. Typically in earnings season the focus is on individual stocks and there are some good opportunites for those that focus on individual situations. I will have a column this weekend about trading earnings news.
We have a positive start to the day and there is finally some nice weather on the East Coast which may help to keep the mood upbeat. The action has been choppy but there is underlying support and a fair amount of optimism about earnings season.