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The Market Ends Higher in Anticipation of Earnings

After-hours trading shows earnings disappointment, but the market still is in a healthy uptrend

Earnings were the main story today aside from further talk about Quantitative Easing and the Foreclosure crisis.  Citigroup (C) lead off the string of earnings as the market cheered its earning release sending the stock as well as other financial stocks higher.  The real story was to be told after the market close with International Business Machines (IBM) and Apple Computer (AAPL).  Stocks were pretty quiet throughout the trading day with cloud computing stocks lower and financial stocks higher.  Although, the last two hours of trading stocks rose in anticipation of earnings and closed just off the highs of the session.


In the after-hours session IBM stock was up to release its earnings report.  A seemingly good report with earnings and revenues higher than expected the stock sold off.  Looking like a sell-the-news-even the stock continued lower in after-hours trading off about four percent.  The stock had made a tremendous run and is now pulling back in after-hours trade to its twenty day moving average.  After-hours trading can lead to wild action, but it’ll be important to see how the stock reacts tomorrow morning.

The quadruple Qs (QQQQ) sold off in advance to AAPL stock earnings release in fear of a disappoint report.  It is recognized AAPL likes to blow away earnings expectations only to guide lower.  Today was no exception as the stock took out $300 mark after the stock resumed trading.  The real hit was to lower than expected gross margins and lower than expected iPad sales (4.19 million versus 4.8 million).  Hidden in the report was the huge upside to iPhone sales, but the action is more important than if the company can beat its numbers.  AAPL is a leading stock and so far the action isn’t that great, but given the run it has been on since this uptrend has begun a pull back is not out of the question.  Tomorrow will be important and we’ll need to see the stock supported.

Perhaps the cry for a pullback or a rest may be in the works here, but do not under estimate the market.  There were plenty of times in March of this year where market pundits were screaming for a pullback and didn’t get one to a month later after we had taken out January’s high.  Be careful when transposing an opinion to your trading, often times your opinion simply is wrong.

One group to take note is the cloud computing stocks.  They did see a bit of support intraday but sold off along with the earnings news from IBM and AAPL.  The likes of FFIV, CTXS, RVBD, CRM, and VMW to name a few have been under pressure as of late and they have been a leading group.  We continue to keep an eye on these stocks as we continue to move forward.

A bright spot to note was the financial stocks today showing support, including C.  It almost seems impossible to think C may actually pull through, but it happens when the Federal Reserve bails you out.  In addition, the NASDAQ has one day of distribution and having the market take a breather is not a bad thing whatsoever.  Our uptrend remains in-tact for now.

Disclosure: No Positions