Market Wrap (recording & summary)
The present value of future cash flow is essentially the underlying guide to longer-term stock market trending. At the opposite end of the spectrum is be individual company earnings announcements, which can inhibit trending. But the latter is only momentary, and often ignores the earnings reaction by the reporting company’s stock. Earnings have more influence inhibiting price action before the announcement than after it. Earnings is otherwise irrelevant.
Except indirectly. Like now.
I’ve been revisiting a theme since NFLX’s earnings plunge, that FAANGs strong-handed sponsorship has stopped accumulating. They don’t have to become sellers for prices to drop, only stop pushing price higher or buying dips. Being leadership, the broader market initially reacts down. But often the stopped accumulation becomes rotation into laggards, sending the the market higher one more time.
AAPL’s post-close earnings were perhaps responsible for inhibiting Tuesday afternoon from extending the morning’s rally. Maybe it was responsible for retracing the afternoon’s 2824.25 bias-up signal test back down to 2818.00 (dropping to 2813.50 was due to the session’s second China trade talks headline). Surging back up to 2824.25 through the close was enabled by month-end portfolio positioning.
Extending higher through Wednesday’s open would all but confirm one more upleg is underway, targeting 2873.00. That will be difficult initially if AAPL misses, sending FAANGs lower again. Even then, as I describe during the Market Wrap recording, an initially favorable knee-jerk reaction by AAPL could fulfill upside targets and end the day reacting back down sharply.
Tuesday’s rally may have created enough room to absorb another round of selling pressure without reversing the trend down. But there is no bullish reason for Monday’s test of 2801.50 to even be attacked Wednesday.
Details and other markets coverage are discussed in the post-market Wrap recording here.
Monitor overnight Globex trading in the chaRTroom here.