(October 06, 2012)
The stock market managed a gain for the week but failed to break out to new highs. While the Dow Industrials actually look poised to see a breakout the S&P 500 could be forming a potential bearish double top while the NASDAQ underperforms and has the potential to form a new lower high.
Market direction could be determined by headlines out of Europe this week with lots of attention focused on Greece and Spain. Yet the real catalyst is probably Q3 earnings season, which is about to begin. Corporate results and guidance could spark profit taking with the market near its 2012 highs. Or it could fuel new short covering since analysts are expecting a disappointing earnings season and there is the chance for an upside surprise.
It doesn't matter if stocks breakout or correct lower the one good thing about earnings season is that it should help produce a new entry point for us. We just have to be patient. The next two or three weeks could be volatile but I strongly suspect we'll either see new breakout entry points or buy-the-dip entry points before the end of October.
Thus I am less enthusiastic about adding new trades tonight. We did add two new watch list candidates to replace the two watch list stocks that moved to our active trades this past week.
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself:
CVLT, JNJ, WFM, COST, VOD, TSCO, MA, WMT, GM, LMT, LLL, EXPE, DECK, VZ,