Low expectations summarizes how many traders and money managers got off-base with regard to  the preceding pummeling that set-up the 'January Effect' rally that really was pretty impressive in a few categories.
 

Freepik

Investors are further spooked by Microsoft slightly beating numbers, which is not particularly important to us for that Company, but removes the heaviness fear that helped suppress the early part of Tuesday's trading (expected to be down anyway with a bit of a Tuesday turnaround, and we got that solidly).
 

There is not a clash of negative momentum with optimism, just the opposite in my view. It's a clash of 'near-unanimous pessimism' with positive momentum I have been projecting and outlining to occur in a grudging fashion for weeks.

I was more interested in (old friend) Texas Instruments, which did make their numbers. TXN beat the estimates on earnings and revenue, but the point isn't so much the stocks behavior, but that Semiconductors aren't being clobbered as the majority of analysts continue harping, while overall they edge higher.
 

(If Canoo moves into the OKC factory, you'll know that real estate deal's done .. a few have questioned.. we don't know .. how they'll be able to finance that.)

In-summary: 

A recession was previously priced-into stocks, our view was that's a story for last year. We're not wildly bullish for S&P, but we are for a handful of stocks, well, optimistic at least. Not everything is going to be AEHR for sure, so it all seems boring aside from AEHR, but it's not. There are pearls more or less stabilizing and remain decent bets on the year being favorable.

Of course AEHR was 'pick of the year' for 2022 since $6-7 a share, and now it is hard to buy. But that was an 'investment' not just a speculative bet, and still is, which means a hold or leveraged for those who are very brave on dips with recognition that they (their is a 'they') don't let the retail investor in easily once companies seriously become established, at least not at early prices.

Remember 'last year' was the 2nd (not first) of a Bear Market. This should be a better year than most expect (with exogenous variables), and good for tech that is disruptive and in the new realms, particularly Silicon Carbide related of course, and perhaps solid state batteries as a more speculative segment too.

After the close we learned that the Chairman Rhea (AEHR.. the origin of it is his first name spelled backward) was a seller days ago at 31 (40,000 shares). However, he retains 550,000 or so, and that's what matters. He's older and finally did some selling as did the CEO, but note they retain immense portions after decades of working at this. The sale was a pre-arranged plan agreed to in November of 2021, so I doubt it had much impact or will have much given it is something we've seen these guys do, but in a sense don't begrudge them.
 

Something like Microsoft (MSFT) was mature 20 years ago, and while we love Azure (and the speed for our video host), even that is decelerating growth for a very mature company. Of course financial media focuses on 'all that' rather than a new generation of technology (such as Silicon Carbide) and I actually expect to learn that Texas Instruments is moving into the 'SiC' space too.. we'll see.

The bears keep saying deterioration isn't priced into the market and they drop back and punt with broad-based macro economic data. We don't see a romp to celebratory prosperity 'yet', but we don't anticipate catastrophe either. That is nonsense primarily poised by a few genuine bears plus the fear marketers.

Operating profits are 'mixed', even Union Pacific said so today. Fine, that's a factor from last year too. Bears say investors are underestimating risk, and it is possible with some of the leading big-caps, but similarly they overestimate risk and underestimate potential in a lot of specialized stocks.

The market is still focused on the Fed, that's for sure. Rares aren't yet going to drop precipitously, but that's not part of the backdrop for specific stocks that don't need an infusion of capital. AEHR (yes) is one such stock with plenty of cash and could use their credit line for facility expansion if they need to. I still ponder if another company is behind lots of the share accumulation, as really it is so persistent that it's almost 'as if' someone knew the price would go up.

To quote a member's reflection on all this (he was contemplating Solid Power as controlling solid-state batteries, as it might happen.. to be determined): but we're thinking of AEHR and CEO Gayn as it is AEHR doing Quality Control for almost all major Silicon Carbide firms.
 

“He who controls the spice controls the universe.”

― Frank Herbert, Dune

The U.S. consumer is holding up reasonably well, the Dollar is weakening as stock markets like, and falling gas prices in Europe has been a tailwind too. It may be that the war expands in the Spring (probable) and we'll assess that, at the same time Oil prices should stay firm almost regardless. The bears won't back-off their insistence on a big decline until the market/S&P's much higher.

Bottom-line: 

Interesting expected Tuesday turnaround facilitated by technical 'glitches' that 'messed with' the limit up or down openings on the NYSE (yet to be adequately explained by Exchange officials).

There is no change in our view and we believe S&P acted well when put on a defensive stance. Broke slightly back below 4000 and then recovered some. I suspect Wednesday might be an up session overall, and satisfied with action in a number of individual issues.

More By This Author:

Market Briefing For Tuesday, Jan. 24
Market Briefing For Monday, Jan. 23
Market Briefing For Thursday, Jan. 19