Stocks sold off on Tuesday with financial stocks breaking some charts below key support levels. The Dow lost 345-points and the selling was broad as we saw 5 decliners for every advancers on the NYSE, with 7 times more declining share volume than advancing. Earnings after the bell did bring some after hours buying in, which could be a boost today, but it could remain choppy out there if the next wave of big earnings isn't as good as Tuesday's release. Hundreds of companies will be reporting this week but Meta (Facebook) after the bell today and Amazon tomorrow will be some of the next highlights. Bonds and the dollar rallied.
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Stocks sold off yesterday partially on the concerns from the small banks after First Republic Bank fell 40% after the sharp decrease in new deposits, and also maybe some nerves regarding the big tech earnings that were coming out. Well, have no fear, Microsoft and Google came through with strong earnings after the bell yesterday. The question is, how much will it impact the entire market because those two stocks were up sharply in after hours trading?
As someone who is on both sides of the Google payable and receivable accounts because I do pay for ads at times and I also get some revenue for ads posted on TSP Talk, I can tell you that the cost to advertise this site with Google has gone up exponentially over the years yet the revenue I make from Google ads on the site seems to get lower each year, despite reasonably stable traffic.
But I digress. The point is that these big tech companies like Google (aka Alphabet) will do what it takes to keep profits up to keep shareholders happy and they do have many revenue streams. If they don't keep shareholders happy, their share prices fall, and like the other FAANG / MAGA type stocks that dramatically impact the Dow, S&P 500, and Nasdaq indices, as well as all of those funds that track them, it will impact the entire stock market both here in the US and globally. Something doesn't seem right about that.
Despite inflation, despite the potential for recession this year, despite the possibility of the government hitting the debt ceiling, despite higher jobless claims, despite the globe flirting with the possibility of another world war - to be dramatic, despite small bank failures and dramatically reduced deposits, the stock market and many unrelated stocks may go up today because giant corporations like Google and Microsoft are well run and know how to make money, and much of their profit last quarter came from cost cutting including laying off workers.
How much should high tech profits impact the rest of the market? For example, the Dow Transportation Index plummeted yesterday to the tune of 3.6%. Do strong earnings from Google turn this back around? That's the question. What does this mean for a market and an economy that seems to be in a little trouble, or at best has a lot of uncertainty?
I have been focused on the bearish flags on the small cap charts, both the Russell 2000 shown below and the S-fund chart, and those regional bank index charts. Yesterday they finally broke down, or I should say broke down again, but the one in March turned out to be a fake out move. This is what we'd expect a bear flag to do, but will the action in Google and Microsoft repair these quickly again?
On the bullish side, the S&P 500 has been holding up rather well in comparison, and even better has been the Nasdaq chart and Google and Microsoft will certainly help here and potentially push it to a new high. It's a nice looking cup and handle formation which we would expect to eventually breakout, so this market continues to be an index picking market.
It will be very interesting to see how investors react to any kind of gap up opening this morning caused by those earnings after the bell. Will it be sold? Will dip buyers jump right back in? Can it change the direction back up for those broken charts? Or, is this finally the market reacting to the weak fundamentals that we see on the horizon?
The Fed FOMC meeting on Tuesday and Apple's earnings on Thursday of NEXT week will be the highlights, followed by the April jobs report on Friday May 5.
The S&P 500 (C-fund) cracked, although it was probably due for one of those double top pullbacks. The 50-day EMA is not far below, and "if" we're back in a bull market this should hold, or at the very least the 200-day EMA near 4018 should. Yesterday's earnings should help retrace some of yesterday's breakdown candlestick, but the reaction after a relief bounce is what will really matter. Will sellers step up again or are the bulls ready to take another shot at new highs? That F-flag broke down as they tend to eventually do, and breakdowns like that don't usually repair overnight, although we saw one in March recover fairly quickly. The PMO indicator is close to rolling over its moving average.
The DWCPF (S-fund) finally broke down from that bear flag. Will this be another fake out like on March 24, or will this one stick? Descending resistance off the peak also continued to hold.
The EFA (I-fund) had a rough day, but with the dollar up 0.47% yesterday, I was surprised this didn't fall a little more considering the profit taking that is possible after its big run up.
BND (Bonds / F-fund) rallied sharply, gapping up on the decline in yields. Open gaps above and below make this a short-term coin toss, but fundamentally I think lower yields and higher bond prices based on weaker economic data, favor the F-fund.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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Stocks sold off yesterday partially on the concerns from the small banks after First Republic Bank fell 40% after the sharp decrease in new deposits, and also maybe some nerves regarding the big tech earnings that were coming out. Well, have no fear, Microsoft and Google came through with strong earnings after the bell yesterday. The question is, how much will it impact the entire market because those two stocks were up sharply in after hours trading?
As someone who is on both sides of the Google payable and receivable accounts because I do pay for ads at times and I also get some revenue for ads posted on TSP Talk, I can tell you that the cost to advertise this site with Google has gone up exponentially over the years yet the revenue I make from Google ads on the site seems to get lower each year, despite reasonably stable traffic.
But I digress. The point is that these big tech companies like Google (aka Alphabet) will do what it takes to keep profits up to keep shareholders happy and they do have many revenue streams. If they don't keep shareholders happy, their share prices fall, and like the other FAANG / MAGA type stocks that dramatically impact the Dow, S&P 500, and Nasdaq indices, as well as all of those funds that track them, it will impact the entire stock market both here in the US and globally. Something doesn't seem right about that.
Despite inflation, despite the potential for recession this year, despite the possibility of the government hitting the debt ceiling, despite higher jobless claims, despite the globe flirting with the possibility of another world war - to be dramatic, despite small bank failures and dramatically reduced deposits, the stock market and many unrelated stocks may go up today because giant corporations like Google and Microsoft are well run and know how to make money, and much of their profit last quarter came from cost cutting including laying off workers.
How much should high tech profits impact the rest of the market? For example, the Dow Transportation Index plummeted yesterday to the tune of 3.6%. Do strong earnings from Google turn this back around? That's the question. What does this mean for a market and an economy that seems to be in a little trouble, or at best has a lot of uncertainty?
I have been focused on the bearish flags on the small cap charts, both the Russell 2000 shown below and the S-fund chart, and those regional bank index charts. Yesterday they finally broke down, or I should say broke down again, but the one in March turned out to be a fake out move. This is what we'd expect a bear flag to do, but will the action in Google and Microsoft repair these quickly again?
On the bullish side, the S&P 500 has been holding up rather well in comparison, and even better has been the Nasdaq chart and Google and Microsoft will certainly help here and potentially push it to a new high. It's a nice looking cup and handle formation which we would expect to eventually breakout, so this market continues to be an index picking market.
It will be very interesting to see how investors react to any kind of gap up opening this morning caused by those earnings after the bell. Will it be sold? Will dip buyers jump right back in? Can it change the direction back up for those broken charts? Or, is this finally the market reacting to the weak fundamentals that we see on the horizon?
The Fed FOMC meeting on Tuesday and Apple's earnings on Thursday of NEXT week will be the highlights, followed by the April jobs report on Friday May 5.
The S&P 500 (C-fund) cracked, although it was probably due for one of those double top pullbacks. The 50-day EMA is not far below, and "if" we're back in a bull market this should hold, or at the very least the 200-day EMA near 4018 should. Yesterday's earnings should help retrace some of yesterday's breakdown candlestick, but the reaction after a relief bounce is what will really matter. Will sellers step up again or are the bulls ready to take another shot at new highs? That F-flag broke down as they tend to eventually do, and breakdowns like that don't usually repair overnight, although we saw one in March recover fairly quickly. The PMO indicator is close to rolling over its moving average.
The DWCPF (S-fund) finally broke down from that bear flag. Will this be another fake out like on March 24, or will this one stick? Descending resistance off the peak also continued to hold.
The EFA (I-fund) had a rough day, but with the dollar up 0.47% yesterday, I was surprised this didn't fall a little more considering the profit taking that is possible after its big run up.
BND (Bonds / F-fund) rallied sharply, gapping up on the decline in yields. Open gaps above and below make this a short-term coin toss, but fundamentally I think lower yields and higher bond prices based on weaker economic data, favor the F-fund.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much for reading. We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
