1/30 Daily Market Note: Attempted Breakout Encountering Pushback from MSFT AMD GOOG Earnings
MSFT holds the Key to any continued sustained breakout given its massive weight in indices
Hi Folks,
Yesterday, I witnessed SMCI (Semiconductor company that is a proxy for A.I.) deliver another upbeat jolt to semiconductors sentiment with a strong quarterly report. While I don’t have this stock, it is on my watchlist in order to understand the ongoing correlation between Semis and the broad market.
Last time SMCI commented on their outlook, its shares carried the entire Semiconductor ecosystem higher the following session. But this morning, a divergence occurred and tech was broadly weak. With this in mind, I sent a note to our WhatsApp group with the opinion that NQ (Nasdaq-100) may surrender the 17620-1730 area (while it traded 17670) to Sellers. I also believed a back-test for 4930 from 4955+ on /ES (S&P 500’s proxy) may be coming.
4930 on /ES (S&P 500 proxy) is now here post-market after AMD/GOOG/MSFT earnings.
This was indeed the case as the QQQ/Nasdaq-1000 had a difficult session which may have been characterized as “Double Distribution”, a state of markets where there is a rather tight range at the open followed by range expansion into a new equilibrium throughout the day. In this case, the double distribution’s second range was lower.
Today’s structure implies to me that current market pricing is facing a bit of gravity as we can see below that on smaller timeframe structures, SPY ETF and QQQ ETF are beginning to diverge. Given the weight of the tech sector in U.S. markets, where the tech sector goes so will the rest of the indices.
The S&P 500 is highly dependent on technology, and a softening QQQ will eventually translate into choppier sessions ahead for SPX rather than the 1-directional moves we’ve seen.
Tonight, we are getting initial earnings reactions from Microsoft, AMD, and Google. With these names having risen so significantly in 2024, any selloff seen tonight is just a give-back of recent progress and not a concern for long-term investors. As can be seen, all of their fundamentals continued to shine bright.
For shorter-term operators/traders, these post-market reactions of rejected attempted advances imply the Buy Side needed to see even more robust earnings prints from these tech titans.
How elevated/depressed a stock trades heading into earnings is just as important as the earnings report itself.
The market structure on higher timeframes continues to be Up and Higher.
However, valuations on the tech are very stretched and this environment has made me add a trading approach on top of my investing views in order to capture tactical upside while reducing exposure to event-driven risk.
It’s possible that the gap-downs on GOOG, MSFT, and AMD will create opportunity for option traders (Buyers & Sellers) as the market still have Wednesday, Thursday, and Friday to digest.
Below, I’ll discuss what the options market is currently looking at on these 3 names (AMD/MSFT/GOOG) for the rest of the week and what type of action may carve out some alpha now that volatility returns.
Make sure to share & subscribe below. Volatility is here, and that means so is opportunity.
-Larry