Happy Tuesday, traders…

Jeff here.

Over the past three weeks, the market has been correcting as traders digest a variety of potentially negative catalysts.

Tensions in the Middle East (and a lowered likelihood of interest rate cuts) have brought share prices down slightly.

The S&P 500 ETF Trust (NYSEARCA: SPY) and Invesco QQQ Trust (NASDAQ: QQQ) are 4.5% and 6.6% off their highs, respectively:

But in the big picture, the market is still incredibly strong as we head into the most important earnings week so far this year.

Most traders lose money during earnings season. But I want to make sure you’re one of the ones who doesn’t.

With that in mind, let’s get to my Tuesday Market Outlook…

Monday’s Relief Rally

First off, we had a positive start to the week with a strong relief rally on Monday. 

This came after tensions in the Middle East didn’t escalate further over the weekend, which eased some trader concerns. 

Often, traders get nervous about potential bad news over the weekend, leading them to “puke sell” stocks on Friday.

When Monday comes around and the feared events haven’t happened, the same traders rush back to buy the stocks they sold, creating what’s known as a relief rally.

(This brand of overnight price action is the crux of my Burn Notice strategy.)

The big question now is whether this relief rally will continue and whether the market can recover half of the losses it suffered earlier in April. 

There’s a potential for that, but as always in trading, there are no guarantees…

Tech Giants Reporting Earnings This Week

Another major factor influencing the market this week is the slew of major tech earnings reports. 

This is the “real” earnings season…

We’re talking about big NASDAQ names like Google, Intel, Microsoft, and Tesla:

Earnings reports from tech giants can cause notable shifts in the market as these companies make up a huge portion of the overall stock market. 

These reactions can lead to great trading opportunities and huge moves, whether the news is good or bad.

However, we’ve gotta remember that inflation is still a significant concern. Interest rates haven’t dropped. 

Market sentiment isn’t just about company earnings right now — broader economic indicators like inflation and interest rates are playing a crucial role in this tape.

This will likely lead to further volatility, which can be a double-edged sword, providing opportunities for quick gains and rapid losses. 

We might also see a rotation from safer assets back into high-flying tech stocks, depending on how investors interpret the earnings reports and economic data. 

Whether this shift will be a lasting trend or just a short-term movement is something we’ll have to watch closely over the coming days and weeks. 

Watch how stocks react to earnings reports, keep an eye on economic news, and see how other traders are responding. 

The Key Word for This Earning’s Season: Caution

As we enter this big earnings week, it’s important to be careful. 

Please, don’t blindly buy calls on a spattering of tech stocks. The idea of a “stock picker’s market” is very relevant now.

The temptation to follow the trend, especially in a market driven by a few tech companies, should be balanced with careful analysis and a look at the bigger economic picture.

You’ve gotta know your history. The memory of the 2000 market serves as a warning that stocks can fall as quickly as they rise. 

The market conditions back then — marked by speculative excess followed by a brutal correction — show the dangers of depending too much on a small basket of names.

Today, the enthusiasm for tech giants is a big part of the market’s energy, raising questions about how long this can last and the chance of a similar downturn.

As we wait for earnings reports from key market players, don’t get ahead of yourself. It’s very difficult to have an edge betting on earnings. More often than not, it’s gambling.

Here are a few tips to keep in mind this week:

Stay Updated: Make sure you’re aware of when major companies are scheduled to release their earnings reports.

Track Market Sentiment: Keep an eye on how other traders are reacting to the news. Market sentiment can often give clues about what might happen next.

Plan Your Trades: Don’t just react spontaneously — have a plan for different scenarios.

Manage Risk: Remember, with high volatility comes higher risk. Ensure you’re not exposing yourself to more risk than you can handle.

We’re in for an interesting earnings week, and there’s a lot to learn, so keep your eyes peeled and your mind open. 

Happy trading,

Jeff Zananiri

P.S. An urgent tech catalyst is set to release a “domino effect” of explosive moves in the coming weeks…

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