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Momentum Monday – Strong Start Of The New Earnings Season

Published 07/29/2019, 03:03 AM
Updated 07/09/2023, 06:31 AM

The earnings season is still young but the results so far have been mostly positive. Strong reports have led to high-volume breakouts. Softer reports have been relatively few and the market reaction to them has been muted.

Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL), Snap (NYSE:SNAP), and Twitter (NYSE:TWTR) reported record quarters which is a direct testament of the health of the advertising industry and an indirect indicator of the confidence of the rest of the business world.

The semiconductor index, SMH after going through a 20% drawdown in May and a 30% drawdown in late 2018. The curious thing is that it has achieved this milestone with NVDA still 40% below its all-time highs and Intel (NASDAQ:INTC) basically going sideways for the past 18 months.

The small-cap index, Russell 2000 (IWM) has finally starting to wake up from deep slumber. 160 has been a major area of resistance for most of 2019. Closing above 160 might spur a major FOMO chasing later this year.

The dip in software momentum names are still welcomed as buying opportunities. Take Atlassian (NASDAQ:TEAM) for example. It pulled back to its 50 dma, where it immediately found buyers and it broke out to new all-time highs after their last earnings report. Many of the software names have started to break out before their earnings report which is a clear sign of high and rising market expectations. The latter could be a double-edged sword because higher expectations are harder to meet. The good news for the bulls is that we are in a market that is willing to forgive minor weaknesses in earnings reports.

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