Stock Market Week Of July 18 – July 22

Overall, the week after July expiration tends to be quite volatile. Seasonally, we can expect swings of 3% to 4%. Most of the time, this week is more bullish than bearish, though.

We’ve hit all-time highs in the S&P 500, and many are expecting a rally. We might get a rally but it will probably be weak and short-lived. Summer rallies are not good long opportunities and should be played carefully. Because of the week’s heightened volatility, it predisposes itself to volatility trades.

Monday:

Don’t expect much action on Monday. BAC reports earnings before the market opens while NFLX, YHOO, EMC and IBM all report after the markets close.

Tuesday:

Tuesday will likely mimic Monday in movements. MSFT reports on earnings and after the market closes is a good time to open bull positions for up gap exposure, as Wednesday seasonally produces several up gaps.

Wednesday:

Crude inventories will be reported on Wednesday. Inventories should be down and the day will likely be bullish for this reason.

Thursday:

A long list of economic data, from unemployment stats and gas storage to home sales and manufacturing numbers, will be released on Thursday. Most will likely be interpreted as bad news, pushing the market downward after a bullish Wednesday. For this reason, profit taking on any short-term long positions before Wednesday’s close might be advised and open those short positions you’ve been eying.

Some big names are reporting on Thursday including V, AMD, SBUX, T, and CMG.

Friday:

Friday should show little volume and not much movement. GE, AAL, and HON are reporting,

Final word:

This week will be a volatile week and is rather hard to predict an overall direction. It will be good for earnings and gap trading, not so good for momentum or mean reversion trades.