Posted 9:30 AM ET – Last Friday the market surged to a new all-time high ahead of major tech earnings releases this week. The expectations are sky high and the market bid should remain strong through the week. It is important to note that the biggest 5 tech giants account for more than 20% of the S&P 500 and that they account for the majority of the gains in the index this year.
TSLA will report after the close today. EPS are expected to more than double to $.90 and sales are expected to rise 89%.
GOOG, MSFT and AAPL will report after the close Tuesday. GOOG is expected to report a 90% jump in EPS and gross revenue is expected to climb 46%. YouTube ad revenues and cloud computing revenues are the catalysts. MSFT is expected to post a 31% gain in EPS to $1.91 and a 16% rise in revenue and cloud computing is a large growth area. AAPL is expected to report a 55% surge in EPS and revenue growth of 23%. The later than expected iPhone launch helped the quarter that is about to be released and they have warned that chip shortages will impact next quarter’s profits.
AMZN and FB will report earnings after the close Thursday. AMZN is expected to grow EPS by 19% and revenue by 30%. FB is expected to post a 69% jump in EPS and a 48% increase in revenues. This comes after strong numbers from SNAP/TWTR last week.
The Delta variant is spreading quickly and countries/states are imposing new restrictions. Booster shots might be required and it is uncertain how effective the vaccines are over time. For the time being, the market is not too concerned.
China’s market decline is a red flag and it is in bear market territory. That will not improve anytime soon as China cracks down on tech companies. Over the weekend it said that it will prohibit online education companies from making a profit or going public. This type of intervention will spark selling and it will impact foreign investment.
Stocks are priced for perfection and earnings expectations have not been raised at this rate for many years. Big cap tech will not be impacted by higher input costs and supply disruptions to the extent that other companies are. I believe that after this week some of the “air will get let out of the balloon.”
I will not enter longer term swing trades until I see a sustained market decline lasts for more than a week. I view this as a low probability trading environment for longer term swing trades.
Day traders should favor the long side. Overseas markets were soft and profit takers will test the SPY bid this morning after a massive rally Friday. This early dip will give you time to evaluate market strength and to identify relative strength. If you are struggling with your day trades, do not take action until we get a big drop in 1OP and a bullish cross. When that happens, only buy stocks in PopBull. If you followed this advice on Friday you made a lot of money. Trading with Option Stalker can be just that easy. Wait for market support and favor the long side.
Support is at SPY $438 and resistance is at $440.