Last week’s yawnfest continues on all the four indexes we follow, namely the Dow Jones Futures, S&P 500 Futures, Nasdaq 100 Futures & Russell 2000 Futures, with the indexes moving sideways in a narrow range. So far, generally benign earnings (aside from Tesla’s miss) and comments from FED members about interest rates, inflation, and geopolitical worries have all failed to shift the price action decisively either one way or another, so all we can say these markets do not want to fall yet.
Our only certainty is the price action is building some very strong levels of both support and resistance, with the channel of price action developing into a really nice example of Wyckoff’s second law of cause and effect. This law states the longer this consolidation continues, the stronger the move once the price action breaks free.
The question is, what will it take to move these indexes, one way or another? Earnings so far reported have failed to do so, but the ones that matter begin today with Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL) reporting after the bell. Meta (NASDAQ:META) and Google are due tomorrow and Thursday, respectively, while Apple (NASDAQ:AAPL) reports next week.
An important aspect of these upcoming tech earnings is what effect recent layoffs have had on the bottom line – it’s usually positive in the short term. Still, mass layoffs also point to a worry about future economic conditions. However, cutting too much could impact growth once the downturn ends.
To give you an indication of the scale of layoffs to date across the tech sector, Techcrunch is keeping a running total – and it’s not good. It’s worth keeping an eye on this, particularly if you trade or invest in any of the companies mentioned. What’s interesting is Apple’s approach which simply refers to any lay-off as a ‘re-org’, and the numbers involved are tiny compared to the other tech companies. We could argue Apple has so much money it can simply ride out any downturn.
Data coming out this week may also spark this moribund market into life. I do like the word ‘moribund’, which means ‘lacking vitality’, as it describes perfectly the current price action and the market mood. The releases to watch are today’s CB Consumer Confidence, Thursday’s Advance GDP, and the Unemployment Claims, followed by the PCE on Friday.
And you will have noticed we are currently in the usual FED blackout period ahead of next month’s FOMC. Other risk events to watch include the squabbling surrounding the debt ceiling, and whilst this is usually resolved this time around, the market appears worried there will be no agreement.
We know this because one-year US credit default swaps are trading at 106 basis points according to the FT, the highest since 2008 and up from 15 at the beginning. Credit default swaps are a form of insurance that pays out if a company or country reneges on its borrowings. Something to watch in the coming days and weeks. The issue may simply be deferred until autumn, but it’s an uncertainty the market could do without.
Moving to the charts, below are the annotated daily and weekly for the YM, ES & NQ.
Looking at today’s chart for the YM, the price action is confined to a very narrow range.
The ES also trading in a very narrow range as the index waits not only for the CB Consumer Confidence release but also the Microsoft and Google earnings which do not happen until after the bell, so trading is likely to be frustrating today. The index also holds onto reasonably strong support at 4140. Let’s see if the CB can help give it a bounce.
Finally, the weekly chart NQ (E-Mini Future for the Nasdaq) – NB – Apologies annotation should say Google and Microsoft reporting today.
