Wednesday, January 23, 2019
1. Equal opportunity earnings season
2. S&P 500 dead cat bounce?
3. Warning sign from consumer sentiment relative strength chart
How can we improve the new Chart Advisor? Tell us at
[email protected]Major Moves
Earnings season is off to a good start this quarter. The majority of S&P 500 components that have reported so far have beaten their analyst consensus estimates.
However, traders are being more discriminating as they are deciding between adding to their positions or taking profits. Instead of being a market where the “rising tide is floating all boats,” this is more of an equal opportunity market.
In an equal opportunity market, every company has an equal chance to make a bullish case for itself. But if it fails to do so, traders won’t hesitate to start selling.
For example, Abbott Laboratories (ABT), Comcast (CMCSA), Procter & Gamble (PG) and United Technologies (UTX) all reported earnings before the opening bell this morning.
During trading today, ABT drifted lower, CMCSA climbed higher and PG and UTX both gapped higher. A year ago, ABT would have likely been dragged higher by the general bullish momentum on Wall Street, but not this year. This year, ABT didn’t meet expectations, and it was punished.
I expect this trend to continue as traders remain cautiously optimistic with an itchy trigger finger to sell.
S&P 500
For the second straight day, the S&P 500 has dropped below 2,630 to challenge support as it consolidates around the 50% Fibonacci retracement level of the index’s bear-market pullback.
This price action has many traders wondering if the late-December and early-January rally on Wall Street was the beginning of a bullish recovery or if it is simply a dead cat bounce.
On the positive side, the fact that the index has dipped below support each day only to bounce right back up tells us that traders are willing to buy the intra-day dip. This is especially encouraging seeing as how there doesn’t seem to be any real progress being made in Congress to end the government shutdown or any real progress being made between the Trump administration and China to ease trade tensions.
On the negative side, the fact that the index is dropping each day and is still hovering below last Friday’s high tells us traders aren’t convinced the market is going to be moving any higher in the near term.
For solid confirmation of either the resumption of a bullish trend or the renewal of a bearish trend, watch for the S&P 500 to either break higher and close above last Friday’s high of 2,675.47 or break lower and close below 2,600.
Comments