It was yet another day of positive action for the indices with a little extra excitement as some headlines about lifting tariffs on China hit.
Once again the S&P 500 ETF (SPY) closed higher than it opened for the tenth straight day. Back in December there was a run with the SPY closed lower than it opened for eight straight days.
There was some rather ridiculous action on a headline from the Wall Street Journal about some discussions about a strategy to forego tariffs on China in order to aid in trade negotiations. That was quickly denied and most of the gains were given back but it planted the seed that maybe there could be a favorable outcome to trade eventually.
The chart of the action on that news headline looks almost like a flash crash in reverse. The big sudden spikes in the indices are caused by news reading algorithms that are programmed to buy on any news headline with a positive comment about trade. The buying is automatic and it doesn't much matter if it's not legitimate or if it's reported in a legitimate publication like the Wall Street Journal.
That is the way the market functions theses days and the best approach is to not be too quick to chase such moves.
We move on to the earnings report from Netflix (NFLX) tonight which is likely to be quite volatile as traders try to game the action. The stock has had a very big run off the December 24 lows and conditions are ripe for some "sell the news" action but that may be so obvious that traders may be looking for a counter play.
The Netflix numbers are hitting with EPS ahead but revenue slightly soft. First-quarter guidance is $0.56 versus $0.86 consensus estimates. Streaming paid subs looks well ahead and is guided up.
The initial reaction is negative with Netflix down close to 4% on the headlines. It will take a while to digest this news but this is not looking like there is going to be a bit gap up like last quarter.
Have a good evening. I'll see you tomorrow.