The Bullish Test Comes As Earnings Season Begins

A Breakout Of Consolidation

Over the last few week’s we have noted the continuing consolidation of the market since the June peak. When markets are overbought short-term, that condition is resolved through a correction or consolidation process. Such is what occurred during the last part of June and completed last week.

As shown below, the market broke out of that consolidation and triggered a “buy signals” across multiple measures. This breakout will give the “bulls” an advantage in the short-term with a retest of the June highs becoming highly probable.

(Click on image to enlarge)

Earnings, The Bullish Test Comes As Earnings Season Begins 07-03-20

The bulls will also gain some additional support from the “Golden Cross” (when the 50-dma crosses above the 200-dma). That “bullish signal” will likely occur over the next week or two depending on market action.

(Click on image to enlarge)

Earnings, The Bullish Test Comes As Earnings Season Begins 07-03-20

The “bullish supports” for the market are currently in play. Such keeps our portfolio allocations weighted towards equity risk. However, there are many fundamental and economic headwinds that could quickly derail the bullish thesis.

Seasonality In Play

In the short-term, the bulls remain in charge currently, and as such, we must be mindful of those trends. Also, the month of July tends to be one of the better performing months of the year.

(Click on image to enlarge)

Earnings, The Bullish Test Comes As Earnings Season Begins 07-03-20

As noted last week:

“With the sell-off on Friday, the short-term oversold condition, a reflexive rally next week would not be surprising.”

That rally reversed much of the short-term oversold condition. While the bulls are in control of the market currently, the upside is somewhat limited. However, the downside risks are reduced with the improvement in the technical underpinnings. Such puts the risk/reward dynamics to a more equally balanced, than opportunistic, positioning. As such, risk controls and hedges should remain for now.

1 2 3 4
View single page >> |

Disclaimer: Real Investment Advice is powered by RIA Advisors, an investment advisory firm located in Houston, Texas with more than $800 million under management. As a team of certified and ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.