The Next Big Market Catalyst is…

It’s been a busy week.

The stock market has posted some back-and-forth action to finish up July trading this week — and the financial media has no shortage of headlines to work the herd into a frenzy.

We’ve endured the big second-quarter GDP reveal, Fed meeting minutes, big tech’s congressional flogging, and countless earnings reports. And despite what many perceive as negative news, the averages have held their own and managed to come to rest near breakeven. Our broad market barometer S&P 500 continues to consolidate near the key 3,200 level we’ve discussed at length since it broke above this mark earlier this month.

Yes, we’re all tired of the negative virus updates. Now, that market is just waiting for its next catalyst. The low bar for this quarter has had 80% of S&P companies beating expectations so far. But remember, there’s plenty of earnings data coming up to further fuel the fantastic run. Don’t listen to the naysayers — the rally’s still alive and kicking!

While the market has remained stuck in its range this week, I’m on the move. I’m heading up north for 10 days. The first item on the agenda is taking delivery of some wood. Splitting and stacking of a full dump truck load is best done now to dry ahead of the long winter. Like a squirrel, it pays to plan ahead for the seasonal change to come.

The day always comes that you wish you had prepared for. The straight up move in Gold, Oil, Euro, and stocks will slow or stall at some point so it is crucial to take profit early. Don’t be afraid to sell some of it “too soon” to guarantee that you can relax by the fire in the future.

Remember, the herd will light its hair on fire if a rush to the exits overwhelms these epic trends.

Don’t get me wrong — I’m not saying this rally is over! We just need to be prepared for the changing season when things look the best. There’s always money to be made in this endless world of opportunities…

Keep it In the Money,

Alan Knuckman

Alan Knuckman
Editor, In-The-Money

Chart of the Day: Semis shine

Greg Guenthner

With big tech in the spotlight this week, let’s take a look at a critical sector that’s hinting there’s more upside left in this rally.

We documented the big breakout in semiconductor stocks earlier this month as the VanEck Vectors Semiconductor ETF (NYSE:SMH) finally took out its February highs. If you’re a Nasdaq bull, you’ll be pleased to learn that this group hasn’t slowed down one bit — even as the major averages have consolidated. Just look at this chart:

SMH

Remember, semiconductors were market leaders before the coronavirus crash. Now they’re retaking their place on top of the tech food chain. As tech continues to dominate the recovery, this breakout shows that we’ll soon see some fresh semiconductors on traders’ radar in the weeks ahead…

Trading Tip of the Day

“A loss never bothers me after I take it.”

— Jesse Livermore

As the market rests near support right now following a choppy week of trade, it’s important to remember to always honor your stop losses. Some traders prefer to set automatic stop losses. Others use mental stops. Your particular strategy doesn’t matter — what does matter is that you know when you are going to get out of a trade before you buy.

It’s tempting to hang on to a losing trade just to see what will happen. But this type of wishful thinking typically only causes mental anguish and leads to deeper losses. Cut your losers and let your winners run. It’s the ultimate market success strategy.

— Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening and editor of Agora Financial's Microcap Millionaires. Over the past decade, Greg has helped build Agora Financial's small-cap and technical research teams. His analysis has appeared in Forbes, Yahoo Finance, Bankrate and countless other websites and publications. Greg is a member of...

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