All major indices continue to move mostly higher in unison, after breaking through their respective 50-day averages. Short-term technicals look mostly bullish for the overall market going into the second quarter and the always-difficult summer season.
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By my estimates, the recent rally was less about more bulls jumping into the market, and more about the bears backing away after China and North Korean issues calmed a bit.
With the vast majority of S&P 500 members having reported first-quarter earnings, the results and future are still a bit mixed and murky, respectfully. As of last Monday, 457 companies had reported results. Total earnings for these 457 index members were up 24.5% from the same period last year on revenues that were 8.9% higher. More than three quarters (77.5%) of companies beat EPS estimates, and 74.6% beat revenue estimates. Retail numbers are coming in the next week and are being watched closely.
The data so far may seem good, but these results are actually fairly in line with analysts' estimates. This quarter's growth is expected to be the best for the year... which means Q2, Q3 and Q4 will be less explosive. However, on the back of a successful Q1, stocks have already priced in very strong earnings growth in many areas.
Making future matters a little more risky is the fact that estimates for Q2 have been moving lower, not higher. That means we might see a greater number of disappointments or downgrades going into the summer. This makes "sell in May and go away" a more probable outcome.
My Focus Right Now
In my premium service, Profit Amplifier, our focus remains on individual stock valuations that are out of line with fundamentals, such as our recent trades with Papa John's, Crocs, Signet and the stubborn Constellation Brands.
I'm finding that algorithmic trading and momentum are running the show (making it difficult for traders to rely on their usual tools), in many cases, pushing stocks whichever way they want in the short term. The key for us will be to watch for when they've pushed a stock too hard in one direction or the other and time the reversion -- and to buy way more time in our expirations than we think we might need.
I'm also watching the big moves in oil and gasoline.
Since mid-February, both crude oil and gasoline prices have soared, outpacing stocks by more than 4-to-1. Anytime we see this kind of outsized move taking place over the course of just a few short months, there's a good chance it will be followed by a short-term pullback.
The price for a barrel of oil reached $80 earlier last week -- the highest price we've seen in the past three years -- in the wake of President Trump's announcement that the United States was withdrawing from the Iran nuclear deal and would be restoring wide-ranging sanctions on the country. This includes revoking permissions for buying petroleum and petrochemical products from a number of Iranian oil companies.
However, the United States wasn't importing oil from Iran in the first place, so this really shouldn't have any impact on either supply or demand. While true that the Trump administration is asking Europe and China to stop buying Iranian oil, neither has to comply. And China, Iran's biggest oil customer by far, is thirsty for cheap oil and needs to keep its economy going. In other words, they are likely to keep buying. Price increases would have negative effects on both EU and Chinese economic output.
More important, after multiple years of lower oil prices, Americans have gotten used to enjoying relatively cheap gasoline. I believe it's likely that expensive oil will make people think twice about how much they're paying at the pump -- tempering summer consumption and driving gas prices at least a bit lower.
An Invitation To Trade With Us
While the rest of the crowd is simply buying stocks and hoping for the best, my Profit Amplifier subscribers and I have spent years "raiding" the market with our simple options trades, taking more than our fair share of gains.
I'm talking about returns of 31%, 35%, and more -- all in a matter of weeks rather than months or years. And sometimes our trades work even faster. In fact, we just closed a trade on Southwest Airlines (NYSE: LUV) for 20.7% in just 2 days.
Bottom line, my stock market raiding technique is the best way to increase your returns while preserving capital and reducing risk. Of course, that's only if it's done correctly.
That's why I created a special report that will walk you through the steps I take when going on market raids, which should help you avoid the costly mistakes many new traders experience. If you'd like to make trades like the one I described today -- or even potentially make 80% when a stock only moves 8% -- go here.
This article originally appeared on StreetAuthority.com.