Yesterday the market found support after a very heavy round of selling where the S&P 500 lost 300 points from the open Thursday. The index is below all of the major moving averages and earnings/guidance will determine if support will hold.
GOOG and MSFT will report after the close today. FB will report after the close tomorrow and AAPL and AMZN will report after the close Thursday. I believe that mega cap tech earnings will be good with the exception of FB. They have subscription issues so I am skeptical of it. The other tech companies are not plagued with supply disruptions and higher labor costs to the extent that other S&P 500 companies are. It will be interesting to see if AAPL phone sales are impacted by the Covid-19 lockdown in China.
Last week I told swing traders with a 3-4 week time horizon to sit tight. That has been good advice and this market drop tells me that it might be a while before we dip our toe in the water. Short term swing traders with a holding period of 1-2 days are able to take advantage of these huge intraday moves, but you have to be very nimble.
Day traders need to wait for the momentum to be established either way. Basic materials stocks have a bid overnight after earnings releases. European markets were up and Asian markets were mixed. TLT has been able to find support, but the recent selling pressure has been heavy. This morning we are going to open near the close from Friday so this is just a pause in the selling ahead of major earnings releases. Last week we saw a very dull trading session ahead of TSLA and we could see similar today as traders prepare for MSFT and GOOG after the close. The best scenario this morning would be consecutive stacked green candles with little to no overlap that fill the overnight gap quickly (30%). That is a move I could embrace and I feel that we will try to build off of the bounce yesterday. Short sellers are typically passive heading into mega cap tech earnings and this early price action would set up some nice longs off of a deep low.
Support is at SPY $420 and resistance is $431.