With the China trade issue temporarily on hold, it was a fortuitous time for earnings season to begin. Investors were eager to move on to other issues and earnings from a few of the money-central banks were a perfect catalyst. Market players not only celebrated good news from JPMorgan Chase (JPM) , but were happy to buy less robust reports from the likes of Goldman Sachs (GS) and Citibank (C) .
The favorable response to bank reports spilled over to the broader market and helped to produce some of the best action in months in groups like biotechnology. Small cap speculation picked up and even some of the broken IPOs bounced. It was a nice change in character, but the big question to ponder now is whether it will continue.
One of the positives that banks had going for them Tuesday was low expectations. The bearish narrative lately has been that the economy is slowing and that would be reflected in some weaker guidance, but that was not the case with the reports out Tuesday.
Wednesday night we have reports from Netflix (NFLX) and IBM (IBM) , which will be a little better test of expectations, but the big guns don't start reporting until next week. If the indexes continue to run up, it is going to change those low expectations quickly, but for now, conditions are good for favorable reactions.
Technically, the S&P 500 is now a bit extended and may need some backing and filling. The gap that was created on Friday morning is key support, but even if it is filed there is good support lower at the 50-day simple moving average.
I've been complaining for weeks about the poor stock picking, but today there was a definite shift. There was much more interest in spotting individual stocks that have been treated poorly and may be ready to rebound. The action tomorrow will provide us with further clues as to whether the market is finally going to focus more on stocks rather than the indexes.
Have a great evening. I'll see you Wednesday.
(JPM, GS and C are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
