A Dull Market
I don’t mind telling you – this has been one of the least enjoyable weeks to write about the stock market in a long while. Trading has been directionless. I’ve watched at least two dozen upside breakouts for individual stocks fail. And despite the clear unwillingness to take stock prices higher, the bears have been unable to get a decent sell-off going…
Trading volume for the week will be the lowest we’ve seen all year. And I’m now wishing I’d taken the week off too.
Only one stock that I track has traded with any conviction. Amazon (NASDAQ: AMZN).
Last Wednesday, I told you “…Amazon is bouncing off its 50-day moving average (MA) at $98.39 today. If you’re looking for a trade, Amazon has a good set-up for a run at its 200-day MA at $107.25.”
And today, Amazon is hitting $107.29 as I write…
Amazon has been a laggard pretty much all year. The company over-hired during the pandemic and trimming its workforce has cost it nearly $1 billion. But one catalyst that investors are missing is how AI will affect its business. Of course, like every other tech company under the sun, Amazon is working on its own AI services . But more importantly, any AI application needs an incredible amount of processing power. And that’s bullish for Amazon Web Services (AWS)…
Of course, I went with Schwab (NASDAQ: SCHW) for my trading this week…
After the stock plunged 35% from $80 to $50, I figured the stock would bounce back sharply after it posted much better than expected earnings on Monday. And the stock did make a pretty nice move to ~$55. But as you know, I was looking for that move to extend to $60 when I bought another round of call options yesterday.
I still think a move to $60 is coming for Schwab. That earnings report from Monday shows that it doesn’t have the liquidity issues that are hitting the regional banks. So that big sell-off should look like a pretty good opportunity and I think a move higher next week is a pretty good bet…if the overall stock market can get a little upside going…
A Little Upside?
I’m hearing from plenty of analysts that the rally we’ve enjoyed ever since the Fed and Treasury backstopped bank deposits has run out of steam. This week’s lackluster trading can certainly be entered as Exhibit A in the bear case.
And some time next week we’re going to start seeing the whole “Sell in May and Go Away” thing make the rounds in the financial media. It always amazes me, no matter how many times that little nugget gets debunked, we still have to hear it every year.
And with the next Fed meeting right around the corner (May 2-3), I’m sure we’ll also have to endure a bunch of speculation about what Powell’s gonna do – even though we already know we’re gonna get a quarter-point hike and then a pause.
With any luck at all, earnings reports from 1,670 companies will drown out the Fed noise.
Something like 75 regional banks report earnings on Monday and Tuesday, so you know that’ll be fun…
I refuse to call Google (NASDAQ: GOOG) by its parent company name – Alphabet – but I am curious to hear what the company has to say when it reports earnings Tuesday about the market share for the Google search engine, now that Mircosoft’s ChatGPT enabled Bing search engine is up and running…
I’m not sure branding is very important when it comes to search engines. Does anybody really care if they search the web with Google or Bing? Seems to me that if Samsung really does replace Google with Bing as the default search engine in all its phones, it’s pretty significant. Especially for Microsoft, which reports earnings on Tuesday as well…
Microsoft (NASDAQ: MSFT) is up ~24% so far this year, while Google is up ~15%. I expect Microsoft to continue to outperform.
I already told you that I’m bullish on Amazon. The numbers from its Amazon Web Services (AWS) will be the key when it reports earnings on Thursday.
Earnings vs Recession
Ultimately, we have a situation where fears about recession are juxtaposed with corporate earnings. While tech layoffs are ongoing, it hasn’t really spread to other sectors. And if earnings continue to come in pretty solid as they have this week, I suspect we get some upside next week…
After all, it’s said that you shouldn’t sell a dull market. And this week has absolutely been dull.
That’s it for me this week, have a great weekend and I’ll talk to you on Monday.
Briton Ryle
Chief Investment Strategist
brit.ryle@protradertoday.com
Facebook: https://www.facebook.com/ProTraderToday
Twitter: https://twitter.com/BritonRyle
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