Summer Doldrums Roll in With Earnings on Tap

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Our View

On Sunday, we did a weekly outlook with some of the bigger levels to watch and what’s going on this week.

This week we will see a pickup in Q2 earnings, with reports from Bank of America (BAC), and Goldman Sachs (GS) on Tuesday, and on Wednesday, Tesla (TSLA) and Netflix (NFLX) will report. On the economic front, Wednesday also has retail sales and housing data.

Despite Friday's selloff, the Nasdaq's 3.3% rally last week was its best weekly gain since March, while the S&P is now up 17.5% on the year. At one point, the index was down about 10% from its February high and at its 52-week low in October, it was down 27% from the highs. However, it’s been a bull-show since, as it has already retraced about three-quarters of its losses.

I know most traders think that better earnings could set up the next leg higher, but sometimes the big intuitional accounts actually sell into the better earnings — especially with the Nasdaq and S&P up so much. You saw that with banks on Friday too.

So while I don't doubt that the market can go higher, I get this feeling we could see some selling this week.