The equities market is at a very critical point from a chart perspective. The major averages, after a recent leg down, have spent the last few days near the lows reached last November. Overhead are major averages acting as resistance. Earnings season is upon us with a majority of the S&P 500 reporting earnings the next 2 weeks and they are not expected to be good. Since the market is perilously close to breaking those new lows at a time when the market is mainly news and technically driven, the question arises, should I trade my set-ups during earnings season? Why is this question critical?
Individual stocks generally trade with the major market. Therefore, if a major stock reports earnings (e.g., Exxon, Wal-Mart, Apple, etc) and the earnings cause the market to go down, then your position will most likely follow as well-no matter how highly probable your trade set-up may be. It also stands to reason that if the stock you trade is in the same sector as the one reporting, your position could be turned upside down. No reason to question your set-up in this case, it is just the way the market works. You know the proverb, “A rising tide lifts all ships.” The opposite is also true. It the stocks you trade move with the market (most do) or if several stocks in the same sector will be reporting over the next two weeks it may be best to wait out the general market verdict for your stock and the sector it trades in.
Due to the very volatility of the market right now your position could move several dollars in either direction from day to day and even intraday, thus causing you anxiety. Your best move may be to trade with smaller positions or not at all. It is easy for a trader to lose all his well earned money by trading in a market that is characteristically different then what he is used to. After earnings season, the market will tell us which way to go. Sometimes the best trade is the next trade.
TRADING IS WAR. PREPARE YOUR WEAPONS.
