Monday: Market Mayhem
In last week’s article, the importance of Friday’s price action in dictating the price action for the following week. With the S&P 500 index making a new low and closing low for the week, Monday’s set-up was obvious. A reversal of the price action or a continuation of the move.
It only took a few minutes off the 6:00 PM EST open of the Sunday night session, to get a preview of the Mondays price action. Concerns over the spread over the Delta variant and stampede into the treasury reinforcing the theme of a “risk off” session.
For the first time in a long time, the index exceeded its average daily range on the downside and did not find support until later in the day at 4224. The only reference point for this level was the pair of daily lows at 4231 area from late June,
The “buy the dip” mentality took over for the last two hours of the session and erased some of its earlier losses. The S&P 500 index ended the session down 67.25 handles at 4251.25, which marked its lowest close since June 23, which just happened to be 4231.50, which matched the two aforementioned daily lows from late June.
PreMarket Prep Stock Of The Day: Nvidia
On a big down day, there are always a few issues in the green that have a specific catalyst. That was the scenario for the counter trend rally in Nvidia Corp (NASDAQ: NVDA).
More on Nvidia: https://tinyurl.com/rcuak6kd
Tuesday: Turnaround Tuesday, Big Time!!!!!
Based on Monday’s strong close, the bulls were looking to fight back on Tuesday and did a darn good job of it. In fact, the S&P 500 index futures never saw unchanged on the session, both in the premarket and during the regular session. In fact, after the premarket low (4255) was breached, buyers stepped in big time ahead of the close (4251.25) at 4252.75.
Not only did the index recoup half of the entire decline, it was able to surpass Monday’s high (4220.75) peaking at 4329. The “buy everything” rally included beaten down bank stocks, meme stocks, “stay at home” stocks and “reopening” stocks.
It was as if Monday never happened. By day’s end,the index added 64.75 to close at 4316 which was just under Friday’s close of 4318.50. The bears had their day on Monday, the bulls fought back. What happens for the remainder of the week, nobody knows.
PreMarket Prep Stock Of The Day: Pfizer
Once again, Pfizer Inc. (NYSE: PFE) is flirting with another breakout over $40. How will the outcome be resolved this time?
More on Pfizer: https://tinyurl.com/2n3p6fv3
Wednesday: Winning Wednesday
Once again, the buyers late in the day were rewarded in Wednesday’s session. In fact, the only chance investors had to buy Tuesday’s closing price (4315.50) was during the premarket when the index retreated to 4310.
Off the open, the index had no problem clearing Tuesday’s high (4329) off the open and drifted higher all day. The pace of the rally accelerated once the index breached the premarket high (4338.50), which just happened to be a weekly swing level.
The rally was aided by a big jump in Crude Oil price, helping that sector and the financials continue to bounce off Monday’s depressed levels.
By the close, the index added 35 handles to close at 4350.50. That closing price puts the index within striking distance of its all-time closing high price of 4367.75 from July 14.
PreMarket Prep Stock Of The Day: Coca-Cola
Coca-Cola (NYSE: KO) had some unusual price action in premarket trading after a strong Q2 report. The question was whether or not it would be able to sustain those gains in the regular session.
More on Coca-Cola: https://tinyurl.com/parj2nfn
Thursday: Rally Continues In Choppy Fashion
It was another up day in the S&P 500 index but it was not so easy to capitalize on.
Instead of the index taking out the premarket high and churning higher for the remainder of the day, the index failed off the open to breach that high and took its time finding a bottom. In fact, the index made several attempts to stabilize at the premarket low (4346), but failed and only made a new incremental low each time.
It was not until early afternoon that the sellers could push it no lower when it bottomed at 4341.50. There were no relevant levels to indicate the daily low would be in that area. Once the index regained Wednesday’s closing price (4350.50), the pace of the rally accelerated.
A late round of buyers enabled the index to make a new high for the day at 4360.50 just before the cash close at 4 PM EST. However, there was another burst in the after-hours session, instigated by several good earnings reports, that allowed the index to tack on another 10 plus handles as the after-hours high was 4371.50.
Since the index settles on the cash close at 4:00 PM EST, the actual closing price (4359.50) an increase of 9 handles by the 5:00 PM EST close does not accurately reflect the strength in the market for the entire session.
PreMarket Prep Stock Of The Day: Cleveland Cliffs
It is always important to monitor the price action of an issue on the day of an earnings report. The reason being, that many fundamental investors will make longer term decisions based on the report and will generate a higher than average volume session. That was the case with Cleveland Cliffs Inc. (NYSE: CLF).
More on Cleveland Cliffs: https://tinyurl.com/tpmamftt
Friday: Fantastic Friday
As opposed to ending the week on the lows last week, the S&P 500 index roared to a new all-time high and closing high on Friday. The bulls started asserting their aggressiveness in Thursday’s after-hours and Friday’s premarket trading and barely let it up the entire session.
In fact, the index never even came close to Thursday’s close (4359.50) as the low of the 6:00 PM EST open on Thursday night was 4367.25. A brief retreat off the open of the regular session found support ahead of that level at 4372.50 and the bull run was on.
Once the index surpassed its former all-time-high (4384.50), the tempo of the rally accelerated. The index had no problem clearing the psychological only resistance at 4400 and finally peaked at 4408.25.
There was a small bout of profit-taking on the close as the index finished the session higher by 43.50 handles at 4403. After being down 94.50 handles from Friday’s close (4318.50), the index finished the week higher by 84.50 handles in a stunning 184.25 handle range. The price action from last certainly indicates higher prices into the end of the month on Friday.
PreMarket Prep Stock Of The Day: Roku Inc.
Roku Inc. (NASDAQ: ROKU) managed to benefit twice from the same catalyst and posted a new all-time closing high at $473.65.
More on Roku: https://tinyurl.com/ht5m8yjc
The Week Ahead
The price action from last week definitely favors higher prices this week heading into the end of the month on Friday. After being down 94.50 handles from Friday’s close (4318.50), the S&P 500 index finished the week higher by 84.50 handles in a stunning 184.25 handle range.
If one was to find any negative at all from Friday, the index was unable to sustain its closing price (4403) in the after-hours session, with the last print at 5:00 PM EST being 4399.25, That slight dip increases the importance of the actual close as well as Friday’s high (4408.25).
Barring any negative Covid-19 headlines, cyber attacks or rumblings from China, earnings will dictate where or not the index is ready to take a breather or not in August. In fact, the five of the top six components of the index all report this week. This interpretation combines the two different issues of Google (NASDAQ: GOOG and GOOGL).
All of the reports will take place after-hours emphasizing the importance of the overnight price action in the index. It begins with Tesla Inc, (NASDAQ: TSLA) on Monday. Tuesday will be the biggest day with Apple Inc. (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOG) all on the docket. On Wednesday, the Street will get results from Facebook (NASDAQ: FB) and on Thursday Amazon Inc. (NASDAQ: AMZN) will attempt to blow estimates away once again.
Also, the interest debate will continue as the Federal Open Market Committee announces its monetary policy on Wednesday at 2:00 PM EST.
Finally, Robinhood (NASDAQ: HOOD) will make its debut on Wall Street on Thursday.
The company will offer 52,375,000 shares of stock, with an additional 2,625,000 being sold by insiders.
Issue(s) With Upcoming Catalyst
It is a five-way dead-head for first this week with the top five of the top six components all reporting, which represents 23 percent of the entire index. While it was “sell the rip’ in the banking sector, the technical make-up of the big tech guns is different than in the financials, which had retreated into their reports.
All of the companies except for Tesla are trading at or near all-time highs so there are no reference points on the upside for resistance. On any sharp retreats in these issues, any investors brave enough to short these issues into the print will most likely be bid at or near any of the daily lows that have put in place along the way. As always, areas with double or triple bottoms may have more significance than one day occurrences.