EB Daily Market Report - Quick Update - Thursday, April 20, 2023
I'm going to give you a brief update on today's action and what I'm seeing. Earnings are coming in fast and furious and the pace will only accelerate over the next few weeks. While there have been many earnings disappointments already, I'm seeing many of those in the financial sector (XLF), which helps to explain why this sector has been sold off so hard the past two months. However, it's options-expiration week, or as I like to call it, "Opposite George" week, where we see a lot of action that moves counter to recent action. For example, the financials. Also, real estate. On the flip side, communication services (XLC) had seen a huge pre-earnings advance from nearly 51 on March 13th to a high close of 59.25 one month later, on April 13th. Since then, I want you to take a look at the "selling" that's taken the XLC back to 57.81:
Wow, that's some pullback! Since that April 13th top, we've seen the XLC GAP DOWN 4 times, only to be bought over the balance of the day, resulting in 4 hollow candlesticks. Keep in mind that big Wall Street firms cannot and do not put in large market sell orders in at the opening bell. Gaps are pure market maker manipulation, created by a feeding media frenzy.
These fabricated gaps to the downside are how market makers are reducing, or trying to reduce, the net in-the-money call premium on several key stocks and market leaders. But there remain many willing buyers, gobbling up discounted shares. Perhaps we'll still see some selling over the next few days, but the resiliency of the bulls at a time when we clearly could be seeing a lot of selling just adds to the bullish bias in the market - all in my opinion, of course.
If today's gap lower is starting a leg down for the market, keep an eye on the 20-hour EMA on the QQQ:
A short-term downtrend is typically marked by failures at the declining 20-day EMA.
The economic and earnings news was mostly weak today. Tesla (TSLA, -7.44%) missed consensus estimates on both its top line (revenues) and bottom line (EPS) when it reported yesterday afternoon. We also saw a disappointing report from Netflix (NFLX, +1.27%) on Tuesday afternoon. These are two key NASDAQ stocks that fell short and gapped lower. Still, the NASDAQ fights to avoid much selling at all. Again, maybe this changes over next few days as market makers would certainly love to see lower prices. But the action is bullish, in my view.
All four economic reports came in worse than expected this morning. Initial jobless claims continue to rise, the Philly Fed Mfg Index came in at an absolutely horrid -31.3 reading, existing home sales fell short of expectations, and leading indicators dropped from -0.3% in February to -1.2% for March (estimate was -0.4%).
Continue to tread cautiously and maintain respect for Opposite George week. By the time we move into mid-week next week, however, I'll be looking to potentially get very long again (leverage) - if the trade sets up. A big earnings report that I believe could give technology stocks a big boost next week is Microsoft (MSFT). Given the way their chart sets up, I'd expect an absolute blowout report. Many other tech stocks, especially software stocks ($DJUSSW) could follow MSFT higher.
That's it for me. Have a day and let's see what the market makers have in store for us this week!
Happy trading!
Tom