The markets

Last night we saw three major indexes hit all-time highs – they are as high as they have ever been in history. The S&P 500 is at an all-time high, as is the Nasdaq (up 0.34%) and the industrials also reached an all-time high. These indexes were spurred on by good company earnings.

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The Russell 2000 was down 0.56%, but it is still above its 21 EMA and looking fine. The transports were also flat.

Earnings announced

Companies to report strong earnings included Boeing, up almost 10%. It had its best day since 2008. AMD (Advanced Micro Devices) was up 4.61%. T (AT&T) was up a solid 5%.

The market is looking strong. Though we need to ask, what is going to stimulate the market once earnings season come to an end? That is the question! We must be wary once earnings season ends.

Facebook announced its earnings and closed higher at $165.61. We got into Facebook as an earnings trade and doubled our money. After hours trading, Facebook was up again, at $171.10 and appears to be still rising. This may keep the Nasdaq up and is something we need to focus on.

Retail is still flat

XRT is a good index to examine the retail sector and yes, it is still looking pretty flat. The XRT chart has a doji. A doji is created by a day’s narrow trading range – meaning the opening and closing price are almost equal. Dojis indicate indecision. What is important when you see a doji is the next day’s candle or the next day’s price action. If it opens above the doji, it’s an indication of bullishness. If it opens below, this indicates weakness. XRT is sitting just above the 21 EMA, a critical point.

Last night the Federal Reserve kept interest rates unchanged. It didn’t increase them. This was widely expected. The Federal Reserve is being dovish. It is trying to spur consumer spending by keeping interest rates low. But we didn’t see a big increase in retail last night, however there was an increase the previous day. Let’s see how this doji on XRT resolves itself tonight.

Regional banks stall

Last night in the elite trading room, we looked at regional banks. KRE is a good index to observe regional banks. It was down almost 2% last night – that’s a decent move down. The Federal Reserve’s decision to keep rates unchanged was a negative. I think the market would like the Federal Reserve to raise interest rates as a show of confidence, but it’s not doing that. Retail is at an inflection point – it broke above the 21 EMA – but what will happen next? Could the Federal Reserve Bank’s decision to leave interest rates on hold lead the market down? Potentially, but right now the market is being driven by earnings. Hence I’d expect the market to move down once earnings season ends, let’s keep watching!

The sectors

Biotech (IBB) was up 0.65%, well above its 323 support level. It is now sitting at $326.52. The utilities were the strongest performing sector, up 0.95%. Real estate was up 0.83%. Financials, the second biggest sector, was the worst performer last night.

Going forward

I am focussed on retail. Will it stay above the 21 EMA? Biotech is still looking good. It could have a run. It is above that 323 level, but it did come down last night to test that resistance level then had a small bounce higher. Will it continue rising today?

Another of our earnings trades, MasterCard, moved up again last night by $1.01. We bought the July week-four call option for 70c and closed it out last night for $2.46. That means we tripled our money on this earnings trade. Brilliant! We got out ahead of earnings, because earnings reports bring a degree of uncertainty. You never know what is going to happen with movement of the stock. With Facebook, a couple of the Elite students, who doubled their money, opted to hold on to one or two contracts through earnings. That looks like it will turn out to be a good move. Generally we close out before earnings are announced, unless you have doubled or tripled your money, then you can hold a contract with no risk. This means you risk money market, not your own. You could have done that with MasterCard. MasterCard’s earnings will be announced about 90 minutes before the market opens tonight, but we have got in and got out and done extremely well!

This market is undoubtedly being driven by earnings. More major companies are due to report their earning next week. These results will either drive the market up or bring it down.