FXTM information and reviews
OctaFX information and reviews
FXCC information and reviews
Libertex information and reviews
FxPro information and reviews
HotForex information and reviews

Taking a bullish bias as we head into mega-tech week

26 July 2021

As we looked at last week, it’s a huge week for US earnings in the five days ahead, with Tesla reporting aftermarket today, with the market implying a 6.1% move on the day. I expect this to get a decent run from clients, as will be the case with Apple, Google, Facebook, and Amazon – but when it comes to earnings. This is the only week that matters – there’s $7t of S&P500 market cap report in the after-market on Tuesday alone.

Consider we’ve now seen 23% of US corporates reporting quarterly numbers already, and 87% have beaten on EPS, by an average of 19.5%, while on sales 81% have beaten. It’s not just central bank liquidity, but earnings have certainly offered tailwinds, and this has justified the market lifting consensus EPS to $194 for this year and $215 for FY22, and as earnings have been revised higher, the P/E multiple has maintained a stable footing.

Good numbers this week and we could easily be looking at a market that is 1-2% higher and given the bull trend, it’s hard to be short with any conviction – longs are therefore clearly preferred both in the NAS100 and at a single stock level with Alphabet, FB, and Amazon, although holding leveraged positions over earnings obviously comes with risk.

The FOMC meeting is also a risk, but as I explored last week it shouldn’t be a vol event like we saw in June – for context, the options market is pricing the S&P 500 for a -/+0.9% move through to Thursday – in fact, running the numbers and looking at past performance (over the past 10 meetings), we can see that the S&P 500 has fallen on average by 0.7% in the six hours from the time the FOMC statement drops.

If we look at moves in the S&P 500 an hour after the last 10 FOMC meetings, we see the average move is +0.06%, although I am interested in the trend, where 7 of them have resulted in the index closing higher. You can see the form here, with the pedigree in price moves (did it close higher?) in the past 10 meetings.

Bear fodder - Market breadth

One aspect that many have read or seen has been the poor participation or breadth in the rally to all-time highs (ATH). There are a million ways to look at breadth, but in this case, I’ve looked at:

In prior periods where the S&P 500 pushed to ATHs, we’d typically see 90% of S&P 500 members > the 20-day MA, 80%+ > the 50-day MA and 40%+ at 4-week highs. We can also look at the cumulative advance-decline line and see this having a period of divergence with the S&P 500 – this is fine when market players are rolling into mega-cap companies, while we see drawdown in financials and energy and alike. The impact, therefore, on the index is cushioned by the fact that such a concentrated group make 30% of the index weight. So for those trying to short the various Indices, the big 5%+ move comes when tech fails to find a bid in a risk-off vibe.

For short-sellers, rotation is bad, a general disdain for equity is good. The question then becomes, will the earnings this week justify the recent bull trend? Naturally if further capital flows into tech on good earnings, then the market is only going one way this week. Recall these names have an incredible pedigree at earnings, and names like FB and Apple have beaten consensus on EPS and revenue in 8 of the past 8 quarters, Google 7 of 8 (on sales) and are up nearly 8% in the past 4 days - of the 45 analysts who cover Google 43 have a buy rating.

The next factor is what happens once we’ve heard from CEO’s and the outlook and news is discounted? A natural catalyst is therefore in the price and we’re back to watching macro trends - could the August period be a time when summer liquidity exasperates any drawdown? For now, I think the balance of probability is skewed for risk to move higher, but things become interesting when you discount news.




Fed Hawkish Policy Leads to Slip of Asian Shares
Fed Hawkish Policy Leads to Slip of Asian Shares

On Friday, Asian stocks plummeted as a new round of hawkish statements from Federal Reserve officials bolstered predictions that interest rates in the United States...

17 Jan 2022

Crude Oil is Heading Towards Highs
Crude Oil is Heading Towards Highs

On Monday, 17 January, the Brent price remains “in the black”; investors are clearly intending to update 7-year highs in the instrument. Brent is trading at $86.40...

17 Jan 2022

Equity bulls jittery, dollar sinks as investors digest inflation data
Equity bulls jittery, dollar sinks as investors digest inflation data

Most Asian shares ventured into negative territory this morning while European stocks markets have opened up marginally lower open after the December U.S...

14 Jan 2022

Stock Futures Trade higher
Stock Futures Trade higher

US stock futures are trading higher as investors continue to digest economic data. This month we have seen much weaker employment numbers and other economic...

12 Jan 2022

Fed Hawks, Markets Stumble, Mixed NFP
Fed Hawks, Markets Stumble, Mixed NFP

Investors marched into the new year with a renewed sense of confidence as concerns over the Omicron variant eased. European shares hit a record high in the first session...

10 Jan 2022

Stock Futures Plunge, BTC Price Crashes
Stock Futures Plunge, BTC Price Crashes

The cryptocurrency markets also got tangled up in yesterday’s massive slump in equity markets. Bitcoin’s price is crashing and traders are wondering how low the price will go...

7 Jan 2022

Editors' Picks

XM information and reviews
FXCM information and reviews
AvaTrade information and reviews
LegacyFX information and reviews
FP Markets information and reviews
FP Markets
FreshForex information and reviews

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.