Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Tech Tumble After Earnings: Profits Locked In, Short Bets on the Rise?

Published 02/01/2024, 12:35 AM

Although Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) Inc. reported better than expected earnings, after hours and then with follow-up during the trading session, sellers came out to lock in gains or perhaps go short.

After all, tech has done much of the market’s heavy lifting to date.

The earnings were already priced in.

And, as per the title of this Daily, many retail investors began to see the light ahead of the FOMC that logically, FED would pause and not get too dovish.

The wisest traders stopped buying big tech ahead of the earnings.

And the wiser started selling after hours and into the early part of the day.

The wise may remain in their positions but should at least have profitable trailing stops in place.

What can we make from both the gap down in Nasdaq and the FOMC bullet points?Nasdaq 100 E-Mini Chart

Looking at the NASDAQ futures chart-

Not horrible, as although it traded lower on the day, it did not leave a gap between Tuesday’s close and Wednesday's highs.

What we can see is that 17,535 area is now resistance to clear and if does, the immediate impact of the drop in NASDAQ prices could easily become a one-day affair.

However, we must remain open to the idea that NASDAQ does not clear resistance and has had its run for now.

As for the impact on the FOMC announcement-

Some of the highlights with my comments:

❖ FOMC Does Not Expect to Reduce Rates Until It Has "Greater Confidence" Inflation Moving Toward 2% (Good luck with that considering 2% is not realistic especially if one considers a growing economy, let alone government spending, debt, geopolitics and so on…)

❖ FOMC Judges Risks to Achieving Employment, Inflation Goals Moving Into Better Balance (In a perfect world best case scenario or what folks call normalization where inflation and fed funds rates are aligned and the economy is humming along)

❖ FOMC: "Any Adjustments" to Rates To Be Based On Incoming Data, Evolving Outlook, Balance of Risks (That is assuming they can stay ahead of the curve and not left behind the 8-ball if any crisis occurs)

❖FOMC "Highly Attentive" to Inflation Risks, Says Economic Outlook Is Uncertain (Maybe the most relevant comment-it is uncertain-plus it leaves room for cutting rates if necessary)

❖ FOMC: Economic Activity Expanding at "Solid" Pace (Yes and no-some have shrunk, others are steady and only a very few are actually expanding)

❖ FOMC: Job Gains Have Moderated Since Early 2023, Remain Strong (Except we believe that the job gains have peaked, and layoffs are becoming more prevalent)

The initial reaction by the market today was nervousness.

However, it often takes at least 24 hours for the market to digest the FOMC minutes.

The glass thus far has been half full and half empty.

Today the herd went towards half empty.

ETF Summary

  • S&P 500 (SPY) 480 now the pivotal zone
  • Russell 2000 (IWM) 195 pivotal, 190 support to hold
  • Dow (DIA) 375 support
  • Nasdaq (QQQ) 415 support
  • Regional banks (KRE) 50 key to hold
  • Semiconductors (SMH) 184 support
  • Transportation (IYT) 262 now resistance
  • Biotechnology (IBB) 135 pivotal
  • Retail (XRT) 70 still has to clear to stay very bullish

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.