Earnings Season: What To Watch Next Week…

| July 8, 2011 | 0 Comments

What a rally…

Stocks have been on an absolute tear over the past two weeks.  In fact, the broad markets haven’t seen a rally like this in over a year.

The tech heavy Nasdaq is leading the way with a 9% gain while the S&P 500 and Dow bring up the rear with a 6% return… all in the span of eight trading days!  Not bad considering many investors thought the markets were going to fall off a cliff two weeks ago.

In fact, that’s exactly why the markets are rallying so hard…

Many investors were expecting the worst.  Some were moving into cash while others were outright shorting the market.  These bears thought it was over for stocks…

But the Armageddon fears actually turned out to be a sweet buying opportunity.  A slew of stronger than expected economic data points sent the bulls on a market rampage.

Now those cash-hoarding investors are chasing stocks higher.  They can’t afford to miss out on yet another market rally.

And what about the ill advised short sellers?

They’re getting steamrolled.  They’re surely buying back their short positions at a substantial loss.  This combination of stock chasers and short covering is pushing the broad markets back to 52-week highs.

But don’t let your guard down…

The markets are falling this morning after a dismal jobs report.  Only 18,000 jobs were added in June and that’s a big disappointment for the bulls.  Given the recent market rally, it’s natural to see some selling here.

What should you be watching next week?

The Federal Reserve releases minutes from their recent meeting on Tuesday.  Investors decipher these notes for clues of their next policy move.  While it’s not expected, any sign of ‘hawkish’ (raising interest rates) language will bring out the sellers.

Highly important retail sales data hits the wires Thursday…

Investors watch this report closely due to the importance of consumer spending.  If retail sales weakened dramatically, we’ll see stocks, especially retail stocks, hit the skids.

However, gas prices have fallen recently and consumers have more money to spend on discretionary items.  I think we’ll see slightly stronger retail sales for June.  Some names to watch in the retail space are Abercrombie & Fitch (ANF) and TJX Companies (TJX).

But the most important aspect of next week is the start of earnings season…

That’s right, it’s once again time for quarterly earnings reports.  Alcoa (AA) kicks off earnings season by reporting on Monday, July 11th.

The next few weeks are littered with earnings reports, so be sure you know when big companies are reporting.  Names like Google (GOOG), Microsoft (MSFT), and Apple (AAPL) move the markets.

What should you do?

The markets are going to need a “breather” to consolidate the recent big gains.  The disappointing jobs number this morning will temper the bulls’ optimism for a few days.  So don’t be surprised to see the markets trade a bit lower next week.

If economic news continues to disappoint investors in coming days, many will use it as an excuse to continue selling.  Those who bought stocks two weeks ago are sitting on sweet gains, and they won’t risk losing them.

So be ready to take some profits off the table…

Maybe you remember, I mentioned Caterpillar (CAT), Home Depot (HD), and Intel (INTC) were tasty buys back then.  If you bought these stocks, consider taking some well-deserved profits.

Above all… be ready for another exciting week in the markets!

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Category: Stocks

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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