The stock market rally will likely continue the week of June 18. The setup in the charts is still overly bullish for the S&P 500, as the relative strength index (RSI) continue to trend higher. My feeling is this week the S&P 500 rises above 2,800 and starts its move on towards 3,000 over the balance of the year. As we have talked about on many occasions earnings growth in 2018 is strong, and to this point, we haven’t seen those earning estimates adjust lower, and that is a good thing.

GDPNow is tracking the second quarter at 4.8 percent, with the next update coming on the 19th. Additionally, a stronger dollar will help to weaken the Euro and give Europe a much-needed economic boost. But that also means that the price of oil will likely continue to its decline. I suspect we will see that continue this week as well.

Technology

Technology stocks have stalled out over the past few trading sessions, but I suspect they will get into gear this week.

Alphabet

Shares of Alphabet are nearing a really big breakout level at 1,172.

Microsoft

While Microsoft appears to be looking for a bounce back to the top its trading channel as well.

Speaking of Microsoft I saw some really big bullish bets in the stock this week, in the January 2020 $135 calls. It is an aggressive round of buying in these calls considering the length of time till expiration, and considering the strike price is over 30 percent higher than the stocks current price.

Facebook

Facebook stock just continues to work higher along its uptrend, which started at the stocks low in March in April.

Amazon

Amazon’s stock continues to push higher, and I still think this works its way towards $1840.

Netflix

This is going to sound nuts when I say this, but I thought it was nuts when I said Netflix would rise to about $390 just a few short weeks ago. But the stock could be somewhere around $450 after earnings results. Based on those trends we have been tracking on Google Trends for subscriptions, it doesn’t seem impossible. We know international growth has been on fire. I suspect over the next week or so some sell-side analysts will likely start putting out some data which suggest Netflix may beat subscriber estimates, and that may lead to more upgrades like we saw out of Goldman this week. It could be a case of being too optimistic on my part, but we have seen this same trend over the last few reporting periods.

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Banks

It will be a big week for the banks, with Goldman and Morgan already falling below key support levels, and JP Morgan, Bank of America and Citigroup all sitting on support.

I’m just going to show the chart for BofA because they all look nearly the same. I think many people look at the chart of these stocks and miss read them. They see the downtrend, and the uptrend, and assume that the banks are going to breakout to the upside. But instead you should be looking at the downtrend and the support level which runs flat at $29.20 on the chart.

We can see that each time the stock has hit that support level since the middle of March it has held, and never retested the long-term uptrend. It would suggest to me the support at $29.20 is the level we need to pay the closest attention to, and that is the pattern the chart is following, which is a falling triangle, and that is bearish. I think that means the banks and Bank of America are all heading lower.

The 1o-2y treasury spread also hit fresh lows around 35 bps.

Dollar and Oil

Also keep an eye on the dollar index, for a breakout above 95, and oil for breakdown towards $61.

Good Luck this week

-Mike

Photo Credit via Flickr

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