Tuesday, July 23, 2013

End of Day Selling Push the NASDAQ and S&P 500 to the Lows of the Session

Earnings season continues and the prevailing theme is for companies to beat on the bottom line, but fall short on top line growth. There are many things we can extrapolate, but in the end it won’t help our bottom line. A big miss from the Richmond Manufacturing index highlights weakness in the Northeast manufacturing sector and the market reactive negatively to the news. Spending majority of the day near the lows of the session the NASDAQ pushed into new low territory just before the closing bell. Not the type of action you want to see from a price action stand point. The NASDAQ did post a day of distribution and has been piling on a few days here. It is something to keep an eye on despite this market remaining in an uptrend. Much will be made of AAPL’s earnings release. At this time they have yet to release earnings and I’ll make a note of them when they do report. The stock has been a drag on the entire market especially the NASDAQ yet it hasn’t kept the NASDAQ from gaining nearing 19% YTD. I suspect a sharp rise in the stock will have many shorts running for the hills. Initial reaction to earnings: It appears AAPL beat estimates and its guidance is sort of inline. The reaction is positive at the moment, but the stock will need to clear some levels before any long signals are generated. Any positive news for AAPL will benefit the NASDAQ greatly and push the index higher. Stay tuned. The insane stock moves after earnings releases, makes it very difficult to hold into the report. If you do not have a sound process you will certainly lose your nerve during earnings season. If you hold an abnormally large position and are stuck it is likely your position size is too large. More often than not many traders simply do not understand risk management and adopt the “go big or go home” mentality. Unfortunately, this is not the type of approach you want in this market. The idea is to stay in the game for a very long time not just a few minutes. Make risk management a priority.

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