Chris Vermeulen | Jul 15, 2018 12:04AM ET
The upside price moves recently in the US equities markets have been dramatic. While many people believe the US equity markets are overvalued and setting up for a top, we believe just the opposite – that the US Equity market and strong US dollar are attracting capital and investment from numerous internal and external sources. We also believe the Q2 2018 earnings season, which is just beginning, could be an additional driving force for further price advances – with big upside moves ahead.h3 3 things at work in the global markets right now:/h3
Simply put, there is so much going on throughout the rest of the world in terms of currency valuations, global trade and policy issues, debt levels and economic sustainability concerns as well as leadership concerns and dramatically changing political and economic environments that investors are actively seeking some level of “standard of protection” for their capital.. And the only places on the planet, right now, that offer that standard are the US, Canada, and Great Britain. Our opinion is that, soon enough, the only economies on the planet that will be capable of handling the ROI and capital requirements of the world will be the most mature and dynamic economies on the planet.
Keeping this in mind, as we near the Q2 US earnings season, expect the following to play out:
This 240 Minute ES chart shows the recent upside price action as well as the recent breakout to new highs (above 2800 for the first time since March 2018). These upside price channels are likely to hold going forward and we expect earnings to drive prices to near or above 2900 (new all-time highs) relatively quickly in the ES. As we have been highlighting, we believe the ES and YM have the strongest potential for upside price moves compared to the NQ.
This daily SPDR S&P 500 (NYSE:SPY) chart clearly shows the rotational lows followed by upside price advances that are indicative of the recent price swings. These deep rotational lows continue to setup “higher low” price levels that allow technicians to understand price pivot formations. Each of these rotations sets up an opportunity for skilled traders to jump into the next upside move for profits. The recent breakout of new highs indicates we could be in for a dramatic move to well above $290 throughout the earnings season.
Lastly, this 240 Minute YM chart helps to illustrate the upside potential of the Dow and Transports Index. The last upside swing in price from July 7th till July 11th totaled about 800 points. If that move replicates with this new upside swing, we could see another +800 point move higher from recent lows near 24,500. This would indicate an upside potential to near 25,300 or higher.
Make sure you are positioned for these moves through this next earnings season. If our estimates are correct, we should see some fantastic trading opportunities over the next 30+ days.
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