The March jobs report released on Friday was quite disappointing as just over 100,000 jobs were created. A record number of people leaving the labor force helped unemployment drop to 8.2%. Futures indicated the market wasn’t about to respond well to a poor jobs report and today’s market certainly indicated weakness. The lone positive on the day was a few leading stocks finished in the green and in the short-term we are oversold. Big Wave Trading’s market model remains in neutral mode while this market is in correction.
Only 23% of stocks remain above their 20 day moving average and 40% above their 50 day moving average. These numbers are showing the market is quite oversold at these levels and the market is due for a bounce. The last time the market saw these figures was back in early March as well as the week of Thanksgiving. While there is no guarantee we will see this market rebound to new highs we can be certain some sort of bounce may occur. Piling onto the oversold bandwagon the McClellan Oscillator now stands at -287. An extreme oversold reading giving credence to a possible market rebound ahead of earnings season.
Earnings season is upon us and AA is set to report earnings after tomorrow’s bell. Every quarter we get to experience the blow-ups and melt-ups. This earnings season should be no different! If you are carrying a sizeable position in a stock it is wise to lighten up ahead of earnings. While you may miss out on some gains you’ll miss out on some big time blow ups. Pre-announcements are unavoidable like PMTC even though it failed a pocket pivot. You can avoid stocks blowing up by simply reducing the size of your position ahead of earnings.
Trend followers do not need to worry about earnings season, simply following the trend and a sell discipline will reap huge rewards. Forget opinions, they are simply guesses and do not give you an edge in the market. Enjoy earnings season and remember to cut your losses short.
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