Did These Earnings Just Cancel The Rally?
ETF Trade Watch
Once again, Tech, Discretionary, and Services led the way for a market rally yesterday. Energy stocks sank for the second day in a row, as do gold stocks. The market was waiting for some after-hours earnings reports from names like Apple (AAPL), Google (GOOGL), and Amazon (AMZN), which unfortunately all missed the mark. This caused a significant sell off in these names, enough to drag the market with it overnight.
Taking today to see how the dust settles may not be such a bad idea as far as risk management goes.
Communication Services Select Sector SPDR Fund (XLC)
Even thought this sector may be weighed down by the likes of GOOGL falling, this is still an area you want to watch. If we still find ourselves in the midst of a bull rally, then this area of the market should bounce back relatively quickly. If the opposite is true, then this area of the market should lead the race to the bottom. Beware of what trade you put on after a gap down like we had overnight, be patient.
Vanguard Consumer Discretionary ETF (VCR)
After rising over 20% during the past month, this is another area of the market that is at an inflection point. If the market can’t find a bit more juice, then this sector will see a bit of a decline as well. This ETF’s top holding is AMZN with almost 20% of the fund’s net assets. Since the company fell after their earnings report yesterday, it will likely drag down the ETF if the fall continues.
Watch to see if any trend establishes itself before taking a trade. The sell off could just be the stock shaking out some frothy-ness from the recent rally, a retest before trekking higher. However, it is better to take a step back and see if that confirms before taking a trade because you feel like something will happen. Let the price tell you what will happen next.
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