The volatility continued today after stocks opened significantly lower in response to poor bank earnings. JPMorgan Chase (NYSE: JPM) and Morgan Stanley (NYSE: MS) got earnings season off to a slow start, reporting a pair of big misses this morning. JPM CEO Jamie Dimon even announced that the company would suspend its stock buybacks among lingering economic uncertainty.
That’s not what bulls wanted to hear and it was reflected at the open. Anticipating a rough earnings season, traders dumped shares across the market.
But stocks rallied several hours later in response to remarks from Fed officials concerning the coming rate hike. Fed Governor Christopher Waller, in particular, encouraged bulls with his comments.
“I support another 75-basis point increase” at the next FOMC meeting, Waller said. Following yesterday’s massive CPI print, analysts were concerned that the Fed would move forward with a 100 basis point hike later this month.
“However, my base case for July depends on incoming data,” Waller added.
“We have important data releases on retail sales and housing coming in before the July meeting. If that data comes in materially stronger than expected, it would make me lean towards a larger hike at the July meeting to the extent it shows demand is not slowing down fast enough to get inflation down.”
That was good enough for investors to partake in some dip-buying this afternoon. Support (yellow line) ended up holding as a result. Now, the S&P may be setting up for another breakout attempt past resistance (blue line) at the late June highs.
Keep in mind, however, that the index is still trading below the 10-day moving average (10-SMA), which has accurately signaled several bearish trend continuations this year whenever the S&P crossed it. The 50-SMA’s headed lower, too, indicating that the longer-term bear market is here to stay.
As a result, bearish continuations are to be expected. And it’s not like stocks closed higher on the day, either. The S&P finished 0.30% lower this afternoon.
Earnings season continues tomorrow and could easily reveal additional bearish surprises.
UniteHealth Group Inc. (NYSE: UNH) reports earnings tomorrow. The stock actually already triggered a short trade today, but because it’s typically not a good idea to take trades immediately before earnings are reported, we skipped UNH.
After the company reports tomorrow, however, UNH may be worth a look if it doesn’t make a big move in relation to its quarterly results. The stock closed below its minor bullish trend (yellow trendline) and the 10-day moving average yesterday.
Today, it technically would have triggered a short position. For those reasons, it might make sense to take UNH short with the same trade trigger ($496.23) after the company reports earnings tomorrow alongside several other major stocks.
