The action cooled off this afternoon as drama over Tesla (TSLA) potentially going private seized the attention of market participants, but it was another positive day for the indices with some good earnings reports helping to keep sentiment positive.
Strength in overseas markets helped the indices build on yesterday's gains and the FAANG growth names performed well once again. Breadth slipped during the course of the day from 2-to-1 positive to 4-to-3 positive, but new highs expanded to over 340.
The action has become a bit frothy and extended in places and while there is still positive momentum it is slowing. As I mentioned, I used the strength to put on some index shorts.
Tesla sucked up the oxygen in the room after its CEO, Elon Musk, tweeted about a possible 'leveraged buy-out.' The announcement was made in a very unorthodox fashion and seemed design to hurt shorts as much as possible. Musk has demonstrated his antipathy for his critics in the past so it isn't too surprising he would try to catch them by surprise.
Tesla closed up nearly 11% at a new all-time high, but the shorts are howling about the lack of details about financing and other issues that will clarify whether this deal has a chance of actually being done. It has always been a battleground stock and the battle is far from over.
Disney (DIS) earnings are out and the initial reaction is negative as EPS missed by $0.08 and revenue was just inline. The stock has run up over the past few days so those numbers just won't cut it.
The overall market continues to trend higher but it is becoming overbought and the risk of reversals is increasing. There is nothing to indicate that a major top is about to occur but some rest and consolidation is likely.
Have a good evening. I'll see you tomorrow.
