As I outlined in my opening post, the market has plenty of good news to digest. The key now is whether the price action reacts to the positives. Good news that doesn't produce positive price action is a warning sign that a turning point may be approaching.
Alphabet (GOOGL) is probably the most important earnings report we have had so far this quarter. The numbers were solid beats on both the top and bottom line. At least a half dozen analysts have raised their target prices with some now hitting around $1475.
The stock is at a new all-time high but down about $13 from the early highs. GOOGL has not always performed well following good reports and it also doesn't seem to have too much influence on the broader market. GOOGL does seem to be giving the FAANG stocks a boost as they are doing most of the heavy lifting right now.
At this point the GOOGL chart is extended and those that are looking to add are most likely looking for some pullbacks and consolidation before they pull the trigger. It is tough to chase it up 4.5% to a new high even when there are some good targets. I don't expect to see GOOGL pullback too much as it will be a 'go to' name for institutions that need to put big money to work fast.
On a valuation basis GOOGL trades with a trailing P/E of 30 but it has revenue growth of 26% and is looking at 23% EPS growth in 2018. It is not cheap but it deserves a premium valuation for posting strong upside to estimates and for its consistent growth.
So far GOOGL is not doing that good of a job at creating broader market momentum. I'm still seeing some mixed action in individual stocks and am disappointed there isn't more chasing. If the indices hold in this area into the afternoon I expect the buyers to make a stronger effort.
I added to a position in Intelsat SA (I) but I am still having difficulty putting capital to work. Momentum names like Turtle Beach (HEAR) and Baozun (BZUN) are working but they are becoming too extended to add to at this point.