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Heading Into Earnings Season with 3 Weeks of Gains

Jim Giaquinto

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It’s too bad we couldn’t extend the rally to a sixth day on Friday, but that was really the only disappointing thing about the session.

The major indices barely took a break today as stocks came well off morning lows to almost finish in positive territory. In fact, we ended the day at session highs.

The S&P and Dow were pretty much breakeven, though they did technically break the 5-day winning run with slight losses. The S&P was down 0.01% (or 0.38 of a point) to 2596.26. The Dow was off by more than 200 points at its worst today, but finished lower by only 0.02% (or nearly 6 points) to 23,996.95. The NASDAQ slipped 0.21% to 6971.48.

Most importantly though, the market has put together three straight weeks in the green. The NASDAQ was up 3.5% this week, while the S&P gained 2.5% and the Dow advanced 2.4%.

Fed Chair Jerome Powell’s comments last Friday of a “patient” Fed was the gift that kept giving this whole week. And then the minutes from the most recent meeting reiterated the point on Wednesday. These seemingly more dovish statements are the biggest reason for the market’s change in sentiment recently.

Meanwhile, recent trade talks between mid-level U.S. and China officials didn’t break any new ground, but there weren’t any setbacks either. And while the President cancelled a trip to Davos due to the shutdown, a higher ranked China official is on his way to Washington for more trade meetings. The market is giving credit to perceived progress for now, but an actual trade deal better be somewhere down the road.

Speaking of the government shutdown, it’s now three weeks old with no end in sight. It hasn’t impacted the market just yet, but folks are starting to get concerned. The longer it continues, the more likely it will have an impact.

Now it’s time for earnings season! It kicks off next week with some of the big banks, including JPMorgan, Citigroup, Wells Fargo, Bank of America, Goldman Sachs and Morgan Stanley, among many others. We’ll even be getting our first FAANG report when Netflix heads to the plate.

It was ultimately a great week for the market, but next week promises to be much more eventful. Let’s hope its also more profitable!

Today's Portfolio Highlights:

Technology Innovators: For the past week or so, Brian Bolan has been attacking the shorts because he believes the selloff is over. And so far the strategy is working! He continued with the gameplan on Friday by adding chipmaking giant AMD (AMD). The stock has a short interest of 11.5%. In addition, the editor was really impressed with what the CEO had to say at CES this week. In fact, he thinks the company will raise its guidance when it reports again later this month. Read the full write-up for more on this new addition.

Insider Trader: This government shutdown is now three weeks old, and Tracey thinks that it will begin to worry the market the longer it goes. With the market going on quite a run and no end to the shutdown in sight, the editor thought this was a good time to take some profits on the following names:

• Sold half of Berry Petroleum (BRY) for 20% in less than a month
• Sold half of Parsley Energy (PE) for 20% in less than a month
• Sold all of PVH Corp. (PVH) for 17.6% in less than a month
• Sold all of Eldorado Resorts (ERI) for 15% in less than two months

But that’s not all! The editor bought today as well. She added a 10% position in medical technologies giant Medtronic (MDT). Shares are down 10% in the past three months, which isn’t that bad a performance for the sharp correction. The CEO and CFO both bought shares earlier this week in what Tracey considers to be a confidence buy for a company that boasts its strongest pipeline in history. The editor also believes this large, $116 billion company will be less volatile in this environment. Read the complete commentary for more on all today’s moves.

TAZR Trader: The SOX index has been soaring even more than the overall market these days. In fact, it is again trading at the big bull market support level north of 1220. Kevin thinks it might make it to 1250, but that’s about it. In fact, he wouldn’t be shocked if it tested the correction lows again. Therefore, the editor decided to short the space with a 5% “starter” position in the Direxion Semiconductor 3X Bear ETF (SOXS). Read his complete commentary for all four reasons why he’s making this bearish play.

Have a Great Weekend,
Jim Giaquinto

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