Bulls Aren't Going to Be Scared Off That Easily

A poor earnings report from Walmart WMT caught the market by surprise on Thursday, but most of the market did a nice job of fighting back and kept the damage limited. Breadth held up well, with about 4,400 stocks gaining and 5,300 declining. New 12-month highs were solid as well, with 425 names on the list.

Most of the damage was done to stocks with aggressive valuations. Walmart has been trading like a growth stock with a very elevated P/E ratio despite rather tepid growth, so a minor miss and weak guidance had an outsized impact on the stock, which fell about 6.5%.

Other expensive names in the technology sector also suffered some pain, but many of them bounced back following gap-down opens and didn’t look as bad. For example, Snowflake SNOW, which has a P/E of 214, was down around $8 per share before closing with a loss of $1.60. Many other growth stocks had similar action.

The bears were unhappy with the lack of downside momentum, but the willingness of bulls to buy dips, even with this level of negative news, was impressive. There continues to be an appetite for buying and even elevated volatility, and negative news isn’t enough to scare away the bulls.

My best advice continues to be to stay focused on stock picking and don’t let macro worries scare you out of good trades. Buying sharp dips has been working well, but increased caution is needed for the high P/E names that can’t afford even a slight miss.

Have a good evening. I’ll see you Friday.

At the time of publication, Rev Shark was long SNOW.