When Netflix (NFLX) reported poor earnings Monday afternoon it looked like Tuesday was going to be a rough day for big cap technology and stocks in general. The Nasdaq 100 gapped down a little more than 1% to start the day but then it was straight up the rest of the day.
Netflix still finished down on the day about $20, but it did what we have seen so often from Amazon (AMZN) over the years. It attracted bargain hunters that shrugged off the short blip and embraced the long term thesis. Netflix has been a winner for a long time and many are convinced it will keep on trending higher over time just like AMZN has done.
Speaking of Amazon, it hit a new all-time high today and what looked like a rough day for the FAANG names turned into a party. Breadth was the inverse of yesterday and was around 2 to 1 positive. The DJIA was the laggard as Goldman Sachs (GS) refused to build on the gains in financials.
The dip buying helped to get things rolling but what really helped as the upbeat testimony from the Fed Head, Jerome Powell. He had all the answers that the market wanted to hear. Inflation is well contained, economic growth looks good, trade issues are not a problem and tax cuts are still beneficial.
What is most notable about the action today isn't just the strength despite the poor NFLX report, but that it has been so inconsistent lately. Yesterday there was broad weakness that was covered up by strength in financials. Today was broad strength that covered up what could have been a disaster in the momentum sector from NFLX.
I hear quite a few traders complaining about the lack of sustained momentum in individual stocks but there is no question that the indices are still in good shape technically. The bearish arguments that sounded so compelling as trade wars flared up, now look like hopeful thinking from the long-suffering bears.
After action like we had today and with earnings season heating up, there isn't much chase to maintain a positive and bullish market bias.
Have a good evening. I'll see you tomorrow.