The indices are hitting key technical levels as we enter one of the busiest news periods of the year. There are key earnings reports this week from Apple (AAPL) , McDonalds (AAPL) , Facebook (FB) , Alibaba (BABA) , Microsoft (MSFT) and Amazon (AMZN) . In addition, there is a meeting of the Federal Open Market Committee starting on Tuesday, which will be followed by their policy announcement and a press conference with Fed Chair Jerome Powell, on Wednesday.
There also will be continued speculation over two key political issues. Although a deal was made to reopen on the government on Friday, there is still very limited hope that an agreement can be made over border security. Also, there are new rumors every day over the progress of talks with China on trade. The market has been more optimistic about some sort of deal, but that seems to shift on a daily basis.
It is an interesting confluence of events occurring as the market grapples with overbought readings and technical overhead after a straight up bounce since the December 24 low.
The pace of the uptrend slowed last week, with a long run of closes that were higher than the open, finally coming to an end. There were three days of flattish action, that were badly needed in order to consolidate recent gains, but then the buying resumed on Friday on optimism about a government shutdown deal.
Overall so far, earnings have been generally positive for the market. Semiconductors have done quite well and even serial-disappointer IBM (IBM) performed well. Netflix (NFLX) disappointed, but technology names have been doing quite well.
This week, Apple (AAPL) reports on Tuesday after the market closes and will be especially interesting after the warning of a large shortfall in its Chinese business. Market players will be trying to guess whether this was a case of lowering expectations in order to set up a positive reaction to the actual report. The reaction to the report will tell us much about overall market sentiment.
The Fed interest rate decision on Wednesday will also be of particular interest, as there appears to be confidence now that the Fed has totally reversed its hawkish bias and is even talking about holding its balance sheet steady.
The market has not liked Jerome Powell much and has sold off on every meeting since he has become Chairman. He doesn't seem to use the dovish language the market likes to hear, and that will be tested again the day after the Apple earnings report.
With the indices recovering most of the losses that they suffered in December, there are many market players that are feeling confident that the worst is over and the indices are back in track. A dovish Fed, progress on trade and some good earnings have offset political drama and the big worry that global growth is slowing.
The bear's big argument is slow global growth, but it is still a rather vague argument and the market has been shrugging it off. There is concern about missing out on further upside, but technically some sort of pullback is probable.
The reaction to all these news events will tell the story, and the technical setup suggests some big swings are likely.