A Sorely Needed Pullback…

Hey traders!

The market is finally pulling back today after what has been a phenomenal run. While pullback days aren’t very enjoyable when you’re long, ideally, you’ve been taking profits on the way up and trimming positions at market extensions.

As I was on vacation, I have been flat, minus a small position I entered in NVDA early this week.

As of this writing, the Nasdaq is down 2%, triggering major sell signals on the daily chart. This is timed nicely with the beginning of earnings season, which I had identified as a potential catalyst of downside action. Why?

Well, look at JPMorgan’s (JPM) earnings’ impact on the stock market last quarter. Like this quarter, the indexes were incredibly strong going into earnings season. But then JPM kicked off the season with a surprising gap lower. This event started a week-long downdraft going into mega-cap tech earnings.

Now, it’s not that I’m anticipating that JPM will have a ‘bad’ earnings report. Actually, last quarter their numbers were quite good. It was more a function of some of the commentary made surrounding the report about the impact that current economic conditions are having on future earnings that caused more of an issue. It’s these comments that can spook investors, especially if the indexes are at highs, the put/call ratio is extremely low, and there is nobody left to buy because everyone is already long.

That said, the market is incredibly resilient, the VIX is low, and corporate earnings are strong overall. So, if earnings commentary spooks investors and causes a pullback, I want to buy it.

I wrote a newsletter on Tuesday identifying a long list of tickers that generally trade higher into earnings. Any long entry will always be better on a pullback—a pullback we are finally getting! So, make sure you check out my watchlist. What are you eyeing for a buy on this dip?

 

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