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Tuesday Earnings Snapshot & A Chartist's Technical Outlay
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February market action is underway, and investors are putting January's correction as far back in the rearview mirror as possible. All the market indexes have exhibited 3 consecutive daily rallies that have materially pared January's heavy losses.
Investors are flooding back into this highspeed market as the focus turns away from the implications of a more hawkish central bank and towards the value proposition that the overdone growth-focused sell-off created, as some secular growth fundamentals come to light in this decisive earnings season.
As I assess earnings reports, the question circling my mind is whether the pandemic's accelerated digital adaptation truly has created an environment where unwavering innovative growth (no matter the economic conditions) is attainable?
We've seen high-volume buying in the last hour of the past 4 sessions, which is an exceptionally bullish signal.
Significant end-of-day (EOD) buying indicates market participants' willingness to hold overnight, a signal of rapidly improving sentiment amid a cascade of solid year-end results. Market moving institutional managers also generally put capital to work EOD, suggesting that the broader market consensus is that a near-term market bottom is in (near-term meaning with current information).
Wild Extended Trading Hours After The Bell
Some pivotal industry-leading enterprises unveiled their December quarter reports Tuesday evening with Alphabet (GOOGL - Free Report) , PayPal (PYPL - Free Report) , and AMD (AMD - Free Report) all posting unexplored year-end fundamentals.
Initial price action from these quarter reports was wildly diverging, with GOOGL and AMD shooting up 9% and 11%, respectively, in extended trading hours following another quarter of incredible growth from the pair.
Alphabet crushed earnings with its Google Search revenues coming in way above expectations while announcing an unprecedented 20-for-1 stock split to improve its tradability among a swelling class of retail traders (make options more affordable). AMD's blowout quarterly report once again justified its rich valuation multiples (38x forward P/E prior to results).
At the same time, a slight EPS miss and weak forward guidance from PayPal (PYPL - Free Report) drove down its already severely punished share price another -18%, pushing the stock 50% below its peak value just 6 months prior. The disappointing outlook from this fintech pioneer pulled the entire sector lower, but its issues appear to be company specific.
The biggest drag on PayPal's results seems to come from its prolonged eBay hangover, which is still impacting its operations nearly 7 years after these businesses parted ways.
PayPal CEO Dan Schulman stated that other exogenous factors were impacting the business, such as inflation (adversely impacting cross-border exchange rates), but Wall Street leading financiers' lack of concern on this front leads me to believe that Schulman is leaning on this "exogenous factor" for other reasons.
The competitive environment in the fintech space is rapidly saturating with a new "trillion-dollar opportunity" coming to the market on a seemingly weekly basis. This quarter showed outsized payment revenue growth, but its account growth is rapidly decelerating as younger competitors take market share.
Technical Breakdown
When employing macro technical analysis on the US stock market, I look at S&P 500 futures (as opposed to the spot) because its non-stop trading from Sunday to Friday makes it the preferred trading tool for professionals. In other words, it's the industry standard for stock market chartists.
Something to remember while reading: Fibonacci extension levels (price targets to the downside) shown above represent entry points, while Fibonacci retracement levels (price targets to the upside) provide technical exit targets.
The S&P 500 is now trading deep into the 4500 handle, with support showing up this morning at a critical 61.8% Fibonacci extension level (drawn from Q4 lows to highs) around 4482.
This 1-hour candlestick chart depicts last week's corrective market action, with this leading index wavered between 4275 and 4440, representing its low on October 1st and its 200-day moving average (MA), respectively.
Image Source: TradingView
After 3 failed attempts to materially break the lower bound of last week's trading range, sellers dried up, allowing market bulls to take back control with solid earnings fundamentals justifying a swift buy the dip reversal in the last 3 consecutive sessions.
Below are the fib-retracement levels for the S&P 500 from its January highs to lows. This shows you the other side of today's trade, with sellers showing up at 4522 until the final hour of the regular session.
Image Source: TradingView
For most of the Tuesday’s session, the S&P 500 was Fibonacci-bound in a tight 40-point range between 4482 and 4522 (less than 1%), until EOD buyers drove this leading index higher, with sellers nowhere to be found. The next levels to watch as we move higher will be the 61.8% retracement at 4592 and the 50-day moving average, which resides at 4630 (and moving lower).
At the same time, the big tech-fueled Nasdaq 100 looked to reclaim its 200-day moving average (blue line), just north of 15,000. The sessions end of day rally drove this growth-focused index above 15,000, but with 12% of its holdings reporting after the bell (GOOGL, PYPL, AMD, SBUX, GILD, EA, & MTCH), pre-earnings jitters kept the Nasdaq 100 just shy until these year-end results hit the wire.
Image Source: TradingView
After significant upside post-earnings price action in the after-hours trade, the Nasdaq 100 is poised to open above its 200-day MA Wednesday and will be looking to breakout above its next fib-retracement around 15530. This growth index remains -4% off its 50-day MA, but if big-tech continues to exhibit secular-growth fueled results (growth no matter the economic environment) this week, the Nasdaq 100 could retake this pivotal technical level before the weekend.
Meta Platforms reports after the bell on Wednesday, and Amazon's (AMZN - Free Report) December quarter results are expected to hit the wire 24 hours after that. This will sum up year-ending results from the trillion-dollar club, which have been nothing nothing short of incredible thus far.
Image: Bigstock
Tuesday Earnings Snapshot & A Chartist's Technical Outlay
February market action is underway, and investors are putting January's correction as far back in the rearview mirror as possible. All the market indexes have exhibited 3 consecutive daily rallies that have materially pared January's heavy losses.
Investors are flooding back into this highspeed market as the focus turns away from the implications of a more hawkish central bank and towards the value proposition that the overdone growth-focused sell-off created, as some secular growth fundamentals come to light in this decisive earnings season.
As I assess earnings reports, the question circling my mind is whether the pandemic's accelerated digital adaptation truly has created an environment where unwavering innovative growth (no matter the economic conditions) is attainable?
We've seen high-volume buying in the last hour of the past 4 sessions, which is an exceptionally bullish signal.
Significant end-of-day (EOD) buying indicates market participants' willingness to hold overnight, a signal of rapidly improving sentiment amid a cascade of solid year-end results. Market moving institutional managers also generally put capital to work EOD, suggesting that the broader market consensus is that a near-term market bottom is in (near-term meaning with current information).
Wild Extended Trading Hours After The Bell
Some pivotal industry-leading enterprises unveiled their December quarter reports Tuesday evening with Alphabet (GOOGL - Free Report) , PayPal (PYPL - Free Report) , and AMD (AMD - Free Report) all posting unexplored year-end fundamentals.
Initial price action from these quarter reports was wildly diverging, with GOOGL and AMD shooting up 9% and 11%, respectively, in extended trading hours following another quarter of incredible growth from the pair.
Alphabet crushed earnings with its Google Search revenues coming in way above expectations while announcing an unprecedented 20-for-1 stock split to improve its tradability among a swelling class of retail traders (make options more affordable). AMD's blowout quarterly report once again justified its rich valuation multiples (38x forward P/E prior to results).
At the same time, a slight EPS miss and weak forward guidance from PayPal (PYPL - Free Report) drove down its already severely punished share price another -18%, pushing the stock 50% below its peak value just 6 months prior. The disappointing outlook from this fintech pioneer pulled the entire sector lower, but its issues appear to be company specific.
The biggest drag on PayPal's results seems to come from its prolonged eBay hangover, which is still impacting its operations nearly 7 years after these businesses parted ways.
PayPal CEO Dan Schulman stated that other exogenous factors were impacting the business, such as inflation (adversely impacting cross-border exchange rates), but Wall Street leading financiers' lack of concern on this front leads me to believe that Schulman is leaning on this "exogenous factor" for other reasons.
The competitive environment in the fintech space is rapidly saturating with a new "trillion-dollar opportunity" coming to the market on a seemingly weekly basis. This quarter showed outsized payment revenue growth, but its account growth is rapidly decelerating as younger competitors take market share.
Technical Breakdown
When employing macro technical analysis on the US stock market, I look at S&P 500 futures (as opposed to the spot) because its non-stop trading from Sunday to Friday makes it the preferred trading tool for professionals. In other words, it's the industry standard for stock market chartists.
Something to remember while reading: Fibonacci extension levels (price targets to the downside) shown above represent entry points, while Fibonacci retracement levels (price targets to the upside) provide technical exit targets.
The S&P 500 is now trading deep into the 4500 handle, with support showing up this morning at a critical 61.8% Fibonacci extension level (drawn from Q4 lows to highs) around 4482.
This 1-hour candlestick chart depicts last week's corrective market action, with this leading index wavered between 4275 and 4440, representing its low on October 1st and its 200-day moving average (MA), respectively.
After 3 failed attempts to materially break the lower bound of last week's trading range, sellers dried up, allowing market bulls to take back control with solid earnings fundamentals justifying a swift buy the dip reversal in the last 3 consecutive sessions.
Below are the fib-retracement levels for the S&P 500 from its January highs to lows. This shows you the other side of today's trade, with sellers showing up at 4522 until the final hour of the regular session.
For most of the Tuesday’s session, the S&P 500 was Fibonacci-bound in a tight 40-point range between 4482 and 4522 (less than 1%), until EOD buyers drove this leading index higher, with sellers nowhere to be found. The next levels to watch as we move higher will be the 61.8% retracement at 4592 and the 50-day moving average, which resides at 4630 (and moving lower).
At the same time, the big tech-fueled Nasdaq 100 looked to reclaim its 200-day moving average (blue line), just north of 15,000. The sessions end of day rally drove this growth-focused index above 15,000, but with 12% of its holdings reporting after the bell (GOOGL, PYPL, AMD, SBUX, GILD, EA, & MTCH), pre-earnings jitters kept the Nasdaq 100 just shy until these year-end results hit the wire.
After significant upside post-earnings price action in the after-hours trade, the Nasdaq 100 is poised to open above its 200-day MA Wednesday and will be looking to breakout above its next fib-retracement around 15530. This growth index remains -4% off its 50-day MA, but if big-tech continues to exhibit secular-growth fueled results (growth no matter the economic environment) this week, the Nasdaq 100 could retake this pivotal technical level before the weekend.
Meta Platforms reports after the bell on Wednesday, and Amazon's (AMZN - Free Report) December quarter results are expected to hit the wire 24 hours after that. This will sum up year-ending results from the trillion-dollar club, which have been nothing nothing short of incredible thus far.
Happy Trading!
Dan
Equity Strategist & Manager of The Headline Trader Portfolio @ Zacks Investment Research