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Did Apple Just Clear the Way for 22K?

If everything goes as hoped tomorrow (a big “IF”), then the Dow should surpass 22,000 for the first time in history. The credit would go to a strong quarterly report from Apple, which beat both earnings and revenue expectations after the bell today. As of this writing (approximately 90 minutes after the close), shares of AAPL are up nearly 6% after hours. The Dow finished today with a sixth straight session on positive ground, another new record and less than 40 points away from 22k. It's ready for a new milestone, and this report may be just the final boost it needs. 

Specifically, the index was up 0.33% to 21963.9 on Tuesday. Meanwhile, the S&P continued its slow but certain trek to its own milestone of 2500 with an advance of 0.24% to 2476.4. The NASDAQ was up 0.23% to 6362.9. The market isn’t just getting good earnings reports; it’s also enjoying some encouraging economic data. Most importantly, ISM Manufacturing came to 56.3 in July, which was less than June but in-line with expectations and securely in expansion territory above 50. 

The portfolios had another double digit winner on Tuesday, as Momentum Trader cashed in a position for more than 50%. There were also buys from Surprise Trader and Stocks Under $10, along with two swaps in Short List. See more in the highlights section below: 

Today's Portfolio Highlights: 

Momentum Trader: Dave thinks that he’s gotten just about all he can out of OraSure (OSUR), which has been stalled for the past several weeks. The editor first bought this oral fluid diagnostics company back in March, and then sold half of it in early May for a 13.8% return. But this second half proved to be much more lucrative with an approximately 53% profit. Dave will have an idea to replace this name tomorrow. 

Surprise Trader: Industrial stocks have been doing well lately, which prompted Eric to pick up a 12.5% allocation in Parker-Hannifin (PH) on Tuesday. The company is a Zacks Rank #2 (Buy) full-line manufacturer of motion control products, and it is scheduled to report on Thursday. The editor really appreciates its history at earnings season, which includes a string of positive surprises stretching back to mid-2015. Furthermore, it is going into this week’s report with two consecutive double-digit percentage beats and a positive Earnings ESP. Read more about this new addition in the complete commentary. 

Stocks Under $10: Earnings season can be exhausting, so Brian Bolan is really excited to add a company that has already reported. Late last month, AXT Inc. (AXTI) matched the Zacks Consensus Earnings Estimate for the second quarter, but the editor was more impressed with revenues of $23.5 million topping expectations by $1 million. Rising earnings estimates have made AXTI a Zacks Rank #2 (Buy), while earnings and revenue growth are expected to easily outperformance industry averages. AXTI previously made more than 25% for this portfolio when it was sold back in March, but Brian is expecting more this time and is willing to hold this position for several months to make it happen. Get a lot more info on this new pick in the full write-up. 

Zacks Short List: For this week's adjustment, the portfolio short-covered RSP Permian (RSPP, +0.8%) and Inphi Corp (IPHI). The new buys that replaced these departures are Williams Companies (WMB) and EQT Corp (EQT). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.  

Reitmeister Trading Alert: "Investors are done celebrating the strong earnings season. Now they are looking for a new fuel source to power the stock market even higher. On Tuesday investors hit pay dirt with the following economic news:  

• "PMI Manufacturing Index rose from 52.0 to 53.3.  

• "The more important ISM Manufacturing Index beat estimates with a stellar 56.3 print. New Orders also impressed at 60.4 which means more growth ahead.  

• "And just for good measure, Redbook weekly retail sales report had one of its best showings in the past couple years at +2.8%. 

"Yes, it is possible that employment news this week or ISM Services could be weak derailing this train. But I think the odds of that are low given all the other leading indicators we have going into these events. And if you wait for all the boxes to be checked before acting, then quite often the profit train has already left the station." -- Steve Reitmeister 

Zacks Counterstrike: "Markets were all but dead today as traders awaited the big report form Apple after hours. Volume levels and trading ranges were very low, with the S&P stuck in a two point range for most of the afternoon. While traders sat on their hands the indices grinded into the green.

"While the day was very slow, Apple gave us some excitement after the bel with a big EPS beat, reporting $1.67 v $1.57. The stock was up almost 7% last check. The only question is if it can hold. We all remember the selling in Facebook the next day. This will be a nice test to see if this tech giant can hold gains.

"Last check, Nasdaq futures were up about 35 handles. If there was another Facebook like reversal in Apple tomorrow I would have to start getting more bearish. However, at the moment, it looks like all-time highs in the Dow, likely the S&P and maybe the Nasdaq tomorrow." -- Jeremy Mullin 

Have a Great Evening,
Jim Giaquinto

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