December 20, 2007
A strong earnings report that exceeded analyst expectations sent the NASDAQ soaring today and leaving all the other indexes far behind. For the Dow and S&P the action is identical to the previous two trading sessions, in which the markets open the day strong, followed by a midday selloff, and then a subsequent rally by the bulls to close the day. One thing to take from today’s session is, that in the midst of bad news if there is one piece of good news (in today’s case it is Oracle’s earnings) the market is going to rally off of it, and try its best to ignore all other news. You have Bear Stearns reporting a crummy quarter and business outlooks among various indicators showing signs of slowing, yet the market gains its traction today off of an earnings report from Oracle that beat estimates. What we should be asking ourselves, is whether we think companies have what it takes to even meet next quarter’s estimates.
We’re not trying to come across as the Bad News Bears, but in the type of market that we are in, where individuals and companies alike are clearly hurting, the market is going to need to run its course, and the idea of continuously propping up the market as we seem to be trying to do once again, in the face of serious problems only gives short-sellers more opportunities to reload at excellent entry prices. Which frankly we don’t mind doing in the right situations. With that said…
Let’s review the charts…
The NASDAQ had an excellent day riding the coattails of Oracle’s earnings report. If the NASDAQ continues to rally, look for it to test the 50-day moving average and then the recent high reached in early December. We will look for it to hold today’s gains before being somewhat convinced that they are legitimate. Often on days like today, where one company’s performance propels an entire index, it can be difficult to hold those gains over the course of the next few trading sessions.
The S&P had a much less exciting of a day, but nonetheless, it managed to make some progress closing in the green. Like the NASDAQ, if this index is going to continue its semi-bullish ways of the last few days, then it is going to have to break the December highs before it can legitimately resume a bullish trend.
