Stocks Unable To Respond To Earnings Results From Top-6,Continued Stimulus And A Red Hot US Economy

Last week’s excellent earnings results from five of the top six US companies were unable to lift equities, which had rallied big into the reporting season. With major equity indices extended on several timeframes, weakness could be brewing.

The Nasdaq 100 rallied 5.9 percent in April. All the action took place in the first week, with the remaining three essentially going sideways. In a volatile last week, it lost 0.6 percent.

In late February, the tech-heavy index (13860.76) lost a rising trend line from March last year, subsequently bottoming on March 5. The rally thereof crested last Thursday when the index ticked 14073.48. But tech bulls were unable to hang on to the gains in that session; the index gapped up 1.2 percent but only to see sellers take control in the very first few minutes. By noon, the index was down 0.5 percent to test its 20-day moving average, which held; the session ended up 0.5 percent – above both its 10- and 20-day. Come Friday, the index lost 0.8 percent to close right on the 20-day, with rising risks of a potentially bearish 10/20 cross-down.

The 20-day also approximates short-term horizontal support at 13840s. The 50-day lies at 13324.46, which is where a short-term rising trend line extends to (Chart 1).

The rather lackluster performance of last week unfolded in a week in which the top six US companies – all tech – reported their March quarter.

Five of the six – Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Google owner Alphabet (GOOGL) and Facebook (FB) exceeded estimates, while Tesla (TSLA) slightly came up short. A few of them really hit it out of the park, with the delta between what was earned and what was expected very wide (Table 1). GOOG, for instance, was expected to bring in $15.74 and ended up posting $26.29. AMZN similarly earned $15.79 versus expectations of $9.49.

Of the six, AMZN, GOOG and FB ended the week up, AAPL, MSFT and TSLA down. Most noticeably, Thursday’s reaction on the Nasdaq 100 (NDX) followed results from AAPL and FB on Wednesday. Even in the three that enjoyed an up week, reaction immediately after earnings was far from decisively bullish, with FB forming a hanging man on Thursday, GOOG a shooting star on Wednesday, while AMZN reversed lower 0.1 percent on Friday after tagging a new intraday high.

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