Investors Are Preparing for Onslaught of Big News
With several key earnings and other economic updates ahead this week, the market is bracing itself.
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It was a choppy session on Monday, but breadth was solid, and dip buyers took advantage of some early weakness. The Semiconductor ETF (SMH) slowed its recent advance but Nvidia (NVDA) and Micron (MU) blasted to new highs.
The Magnificent Seven (MAGS) also performed well with a gain of 0.8%. Google (GOOGL) is leading the group along with Nvidia. With expectations for the mega-cap names continuing to rise, the upcoming earnings reports are likely to be highly volatile.
Selective Strength
Overall, the market is holding up very well despite the overbought technical condition of the indices and many leading technology names. There was some profit-taking in the optical sector and other groups that have had big moves lately, but it was fairly narrow action.
There are still some very good charts in various sectors that are not wildly extended but concerns about the broad market are preventing more aggressive speculation. There were only about 225 new 12-month highs on Monday, which is mild in view of how strong the indices have been. That may be bad news for index momentum but it is good news for individual stock picking.
The Calendar Ahead
The catalysts start arriving on Tuesday and do not let up. The FOMC begins its two-day meeting with the policy decision Wednesday afternoon. This is Jerome Powell's last meeting as chair before Kevin Warsh takes over and the press conference will get close attention for any shift in tone on stagflation risks. Rates are expected to stay on hold but the language is what matters.
Wednesday after the close brings Microsoft (MSFT) , Google, Meta (META) and Amazon (AMZN) . Apple (AAPL) follows on Thursday. Five Magnificent Seven names back to back. The bar is high and AI capex commentary will be parsed closely. GDP arrives on Thursday morning and PCE on Friday.
Game Plan
Stay ready for significant movement on this news flow. Expectations are high and charts are extended in many cases and that creates added risk of a sell the news reaction. The game plan, if you are so inclined, is to keep position sizes manageable and let the headlines do their work before pressing aggressively in either direction.
Have a good evening. I'll see you tomorrow.
Related: Nikkei Sets Record as Tech, Consumer Plays Battle in Japan
At the time of publication, DePorre was long GOOGL and NVDA.
