Stocks are starting the week with a slight positive bias as we await a flood of news. In addition to earnings, there is a surge in the Delta variant in China, continued negotiations in Washington on new spending and taxes, and continued concern about interest rates and inflation.
The news flow is hitting as the major indices have gone from oversold to overbought in a matter of about 14 trading days. The S&P 500 traded at an intraday low of 4279 on Monday, October 4, and then hit a new high on Friday, October 22 of 4560 - a move of 281 points or 6.5%. It wasn't quite as smooth as it sounds, as there was quite a bit of rotation between sectors and some very choppy action, but it's been a good run.
There will be plenty of excuses for selling as all this news hits, and folks that read charts will tell us that we need some rest and consolidation. That can take place through more rotation and choppiness and probably will. To be successful in this market right now, the key is to find the sectors that are working and focus on stock picking. This past week the two areas that offered the most potential were cryptocurrency-related names and some of the SPACs and the Digital World Acquisition (DWAC) in particular.
I expect to see the aggressive trading continue in those sectors but what will be particularly interesting this week is that there is a slew of major stocks reporting earnings this week. Just a few of the key names are as follows: Monday - Facebook (FB) , Tuesday - Alphabet (GOOGL) , Microsoft (MSFT) , and Twitter (TWTR) , Wednesday - Boeing (BA) , Thursday - Apple (AAPL) , and Amazon (AMZN) .
The FATMAAN have lost some of their luster recently, with the only one hitting a new high being Netflix (NFLX) , which has already been reported. Expectations are low, and there is quite a bit of uncertainty about Facebook after the drubbing SNAP (SNAP) took on Friday.
Quite a few other stocks report in the next two weeks, and then many of the small-caps will report in the first half of November. There is going to be some very interesting chart development as well as volatility as we move through the week.
Cryptocurrencies are rebounding this morning, and there is more speculative interest in SPACs and a couple of Trump-related names. Although there is plenty of news flow to move the markets, it looks like the focus is still on stock picking rather than major market trends. The indices have to deal with overbought conditions but traders will be searching for action.