Good morning and Happy Friday!
Big beats on earnings so far. 87% of companies beat on both revenue and earnings per share so far. Did you expect anything different? SPX up 9, Dow up 25 and NAS up 53, and those markets rocketed up after hours as a result of earnings. However, when there is a lot of exuberance, that is when complacency starts to creep in. If the SPX does not take out the recent all time high, that may be a warning sign that the top may be in for now. If that is the case, the 3.6% correction may turn into something more.
Additionally, economic data is strong, but it has been coming in weaker than expected. I closed out all of my 7 DTE positions for a profit and don’t have any on. So now my trade plan does not allow me to open new positions until we get a spike in volatility.
I am not predicting a top but just pointing out some of the characteristics of an overheated market. Remember that markets look out six to nine months. So will earnings be better than now? There are good reasons to think that earnings may have peaked.
So always stay long but keep some cash on the sidelines just in case there we get opportunities to buy at lower prices. Enjoy your weekend!
Talk soon,
Al Losada
Founder | SimpleOptionStrategies.com
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