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The earnings season is still young but the results so far have been mostly positive. Strong reports have led to high-volume breakouts. Softer reports have been relatively few and the market reaction to them has been muted.
Facebook, Google, Snapchat, and Twitter reported record quarters which is a direct testament of the health of the advertising industry and an indirect indicator of the confidence of the rest of the business world.
The semiconductor index, SMH after going through a 20% drawdown in May and a 30% drawdown in late 2018. The curious thing is that it has achieved this milestone with NVDA still 40% below its all-time highs and Intel basically going sideways for the past 18 months.
The small-cap index, Russell 2000 (IWM) has finally starting to wake up from deep slumber. 160 has been a major area of resistance for most of 2019. Closing above 160 might spur a major FOMO chasing later this year.
The dip in software momentum names are still welcomed as buying opportunities. Take Atlasian (TEAM) for example. It pulled back to its 50dma, where it immediately found buyers and it broke out to new all-time highs after their last earnings report. Many of the software names have started to break out before their earnings report which is a clear sign of high and rising market expectations. The latter could be a double-edged sword because higher expectations are harder to meet. The good news for the bulls is that we are in a market that is willing to forgive minor weaknesses in earnings reports.
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