Category: Commentary

All charts on Momentum Monday are powered by MarketSmith

The post-election rally didn’t last long. Stocks are under pressure again. QQQ and SPY are at important pivotal levels. Will QQQ bottom around 165-166, make a higher low and make another attempt to close above its 50-day moving average or it will have another leg lower. Both are equally likely. With elections out of the day, the market will focus on tariff negotiations, earnings growth, and the Fed.

Semiconductors, tech, China, biotech, financials are leading to the downside. Select retailers and restaurant stocks continue to show relative strength.

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All charts in this post are powered by MarketSmith

The number of stocks that beat earnings estimates this earnings season is not that much different than any other earnings season. What’s different is the market reaction to many reports. We continue to see stocks getting crushed after reporting positive earnings surprises. The latest examples are Zillow, Match Group, and Roku, All of them reported earnings above analysts’ estimates but gave softer earnings and sales guidance. The market reaction has been unforgiving.

Past earnings are a snapshot of the past. Earnings guidance is forward-looking. Since the stock market strives to be forward-looking, it pays more attention to forward guidance.

Companies are typically very conservative when they provide any future guidance. The goal is to low-ball analysts’ estimates, so they can be easily exceeded next quarter. This is why is so rare and special when a company provides a strong guidance. Take a look at the market reaction to Twilio, Etsy, and Crox this week. All of them gave strong earnings guidance.

Check out my latest book: Swing Trading with Options – How to trade big trends for big returns.

All charts on Momentum Monday are powered by MarketSmith

Apple beat earnings estimates again, but it sold off after it gave a soft sales guidance and said it will stop to provide unit sales updates. The market reaction is not unique to AAPL. The market has been unforgiving this earnings season. It has punished the slightest weakness in all earnings reports. This is why we say that the market mood matters. Lower prices are usually the end result of high expectations and sour mood.

In the meantime, consumer staples continue to lead and break out. This is a typical sign that the market is trying to discount a potential recession 6-12 months ahead.

We go over some new names on the SL50 list and discuss the strength in Mc’Donald, Starbucks, and some other retail names.

Don’t forget to check out my latest book: Swing Trading with Options – How to trade big trends for big profits.