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Opening Bell: U.S. Futures Rally As Tech Results Outperform Low Expectations

By Pinchas CohenMarket OverviewJul 27, 2022 07:15AM ET
www.investing.com/analysis/opening-bell-us-futures-rally-as-tech-results-outperform-low-expectations-200627695
Opening Bell: U.S. Futures Rally As Tech Results Outperform Low Expectations
By Pinchas Cohen   |  Jul 27, 2022 07:15AM ET
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  • Tech stocks jump after hours
  • Yesterday's panic turned to exuberance
  • Markets remain unstable

Dow, S&P, NASDAQ, and Russell 2000 futures as well as European advanced as corporate earnings reports were not as bad as feared thus giving traders the confidence to increase risk ahead of today's pivotal US Federal Reserve's monetary policy decision.

All the major US contracts were well in the green, led by the NASDAQ 100 as investors rotated out of economically sensitive sectors and dived into growth stocks after earnings from Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) published after the US close yesterday which met low expectations.

Russell 2000 futures posted the worst performance. Big tech and small caps have positively correlated since the Fed turned hawkish, as both underperform in a rising rate environment. However, since the outlook turned negative on recession fears, big tech and small caps decoupled with growth stocks overtaking sectors that thrive when an economy accelerates.

However, investors are somewhat cautious ahead of the rate announcement. The VIX is down at 24 after peaking at 25 following yesterday's tech reports, which afforded traders a sigh of relief.

VIX Daily
VIX Daily

It is worth noting that the "fear gauge" lows have been rising but the highs have been in decline which denote some disagreement in sentiment. However, the current rising trendline—demonstrating growing worries—began at the November lows. Moreover, the volatility index has been on the rise since June 2021 and if it continues on this trajectory, it will have climbed through the downtrend (dotted) line since mid-2020.

European shares on the STOXX 600 opened higher after upbeat earnings there.

STOXX 600 Daily
STOXX 600 Daily

The index is extending gains for the seventh session out of the last nine. Nevertheless, the price fell from session highs as the pan-European benchmark nears its downtrend line since the January all-time high.

UK headquartered, Reckitt Benckiser (LON:RKT) posted an 11.9% rise in quarterly like-for-like sales, beating estimates.

Reckitt Benckiser Weekly
Reckitt Benckiser Weekly

The multinational consumer goods firm completed a massive H&S bottom development since January 2021. This bottom is a diamond in the ruff of markets, as we might already be in a recession. The company is bucking the prevailing trend as investors stock up on consumer staples as a defensive measure.

Italian bank, UniCredit (BIT:CRDI) raised its guidance, with profits coming in significantly above expectations, as the bank seeks a $1 billion buyback approval. This news is especially favorable for the bank as it did not pull out of Russia after its invasion of Ukraine.

Technically, CRDI looks very different than RKT.

UniCredit Weekly
UniCredit Weekly

As opposed to the consumer's dramatic bottom, the Italian bank's is ranging, possibly forming a continuation pattern, bearish after halving in value in 5 months.

US stocks sold off yesterday after Walmart (NYSE:WMT), the world's largest retailer, highlighted the impact inflation on consumer spending and MorganStanley issued a "potential warning signal" for Amazon's (NASDAQ:AMZN) merchandise margin which unnerved investors.

Investors' apparent fickleness from pessimism, after Walmart's release, to optimism today underscores how risky the current market is. This lack of collective level-headedness is a sign of a market top. I may be wrong but I think investors are on a sugar high before they exhibit withdrawal symptoms.

Yields on the 10-year note avoided topping yesterday.

10-year Treasuries Daily
10-year Treasuries Daily

But they are making their way to that finish line, and the yield curve remains inverted.

The dollar retreated.

Dollar Index Daily
Dollar Index Daily

The greenback is struggling at the top of a potential Falling Flag, presumably bullish after the receding 5.4% rise. The flag is supported by the previous high, as it meets the uptrend line. Consider this paradigm a holding pattern.

Gold rebounded from a two-day selloff.

Gold Daily
Gold Daily

The yellow metal may develop a small H&S bottom above the lowest levels since mid-2020. A break above $1,740 will strengthen the case for a rebound off the lows rather than a massive double top. However, I think a rally would be temporary and considered a risk to the commodity's downside.

Bitcoin was little changed

Bitcoin Daily
Bitcoin Daily

The cryptocurrency formed a mighty hammer yesterday, with an extremely long lower shadow amid a Rising Channel. I remain bearish in the long term.

Oil rose within a range.

Oil Daily
Oil Daily

The price resumed struggling within a Symmetrical and Descending Triangle while trading within a Falling Channel.

Up Ahead

Disclaimer: The author currently does not own any of the securities mentioned in this article.

Opening Bell: U.S. Futures Rally As Tech Results Outperform Low Expectations
 

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Opening Bell: U.S. Futures Rally As Tech Results Outperform Low Expectations

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Comments (7)
Thanos theBear
Thanos theBear Jul 29, 2022 6:40AM ET
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what happened to the big short at 4K sir?
Brad Park
Brad Park Jul 27, 2022 11:31PM ET
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What about the ETH to $200 prediction? When is that happening?
Pinchas Cohen
Pinchas Cohen Jul 27, 2022 11:31PM ET
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1. I never said that is happening. 2. if it is happening, I have no way of knowing when. 3. I estimate that it could happen within a year.
Hector David Ordaz
Hector David Ordaz Jul 27, 2022 10:37AM ET
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Hi man, thanks for your analysis. Bitcoin is a good thing, have you ever watched Zeitgeist Addendum?
Pinchas Cohen
Pinchas Cohen Jul 27, 2022 10:37AM ET
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Hi Hector, why is Bitcoin a good thing? Also, my long-term analysis is based on technicals, irrespective of what I think of the merits of BTC.
Mohd Izhar Muslim
Mohd Izhar Muslim Jul 27, 2022 9:56AM ET
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Thank you for sharing the article 👍
Pinchas Cohen
Pinchas Cohen Jul 27, 2022 9:56AM ET
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Sure thing, Mohd
Jack Peterson
Jack Peterson Jul 27, 2022 7:54AM ET
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Loved the line that said investor’s are on a sugar high before they exhibit withdrawal symptons! The idea of putting a band aid on a bullet wound, aka a soft landing is for those living on Fantasy Island! There is a correction coming unless the FED is no longer concerned abour thier mandate on inflation… maybe they are comprised too!
G D
G D Jul 27, 2022 7:40AM ET
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They literally cut the estimations HOURS before they arrived to make it seem like it wasn't that bad. They're feeling the pain.
Pinchas Cohen
Pinchas Cohen Jul 27, 2022 7:40AM ET
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Inightful.
Pinchas Cohen
Pinchas Cohen Jul 27, 2022 7:40AM ET
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Insightful.
Amie Inconnue
Amie Inconnue Jul 27, 2022 7:40AM ET
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G D, you are talking about Microsoft and Google, right? I thought that estimations are derived from what analysts are expecting, am I wrong?
Pinchas Cohen
Pinchas Cohen Jul 27, 2022 7:40AM ET
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Jack Peterson
Jack Peterson Jul 27, 2022 7:27AM ET
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The excessive exuberance continues until it doesn’t… good luck everyone..
Pinchas Cohen
Pinchas Cohen Jul 27, 2022 7:27AM ET
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Good luck, Jack.
Jack Peterson
Jack Peterson Jul 27, 2022 7:27AM ET
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Love this line from your article, investors are on a sugar high before they exhibit withdrawal symptoms..
Pinchas Cohen
Pinchas Cohen Jul 27, 2022 7:27AM ET
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Jack Peterson  Yes, I was surprised myself it survived editing ;)
 
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