Takeovers just change the equation. They scare shorts, and shorts are integral to putting out supply that often tends to stop stocks in their tracks.
Take this Time Warner (TWX) deal. If you are short Netflix (NFLX) or Viacom (VIAB) , the first because you think it has too big a run and the second because the fundamentals are awful, you fear any Time Warner deal on Monday. You feel you should cover because both are going to be rumored instantly if there is a deal. Who can stay short in that environment?
Likewise, if we get more consolidation in the semis, meaning if Qualcomm (QCOM) , buys Action Alerts PLUS holding NXP Semiconductor (NXPI) for the rumored $110 price, then do you want to be short Skyworks (SWKS) or Qorvo (QRVO) or Micron (MU) ? I don't think so.
Normally, we would be focused just on earnings, but these takeovers hijack the narrative. But these days it's too hard to just focus on earnings given that these companies are huge and make it so other than the hundred-billion-dollar club you have to expect that anything can happen.
I find it ironic given that the Feds just blocked Lam Research (LRCX) and KLA-Tencor (KLAC) , are giving Action Alerts PLUS holding Walgreen's (WBA) and Rite Aid (RAD) a real hard time and don't seem inclined to let DuPont (DD) and Dow Chemical (DOW) , which is a holding in Cramer's Action Alerts PLUS, merge so easily.
No matter, the prospective deals are in control and there are lots of tales to spin that make a ton of sense even when the fundamentals may be weaker than expected.