The market had more positive news to work with Thursday as European Central Bank president, Mario Draghi, was properly dovish and Facebook (FB) posted a strong report, but we saw a sell the news reaction to the early strength. There were also some less than stellar reports such as Tesla (TSLA) that created some problems.
The poor reaction to Facebook helped to create some nervousness in front of the big reports that are due later in the evening. So far, Alphabet (GOOGL) , Starbucks (SBUX) and Intel (INTC) are seeing strong reactions, while Amazon (AMZN) is trading down. It is going to take a little while to digest this news, but the numbers look solid and the initial reaction is to chase these stocks higher. Whether they reverse like Facebook did Thursday will be the issue.
While the action was weak Thursday, it wasn't bad enough to do any major technical damage. What will be much more important is the reaction that we see on Friday as Thursday's after-hours reports are digested. The bear's fears of slowing growth seem to be unwarranted, but whether the good news can generate sustained momentum is the question.
The report from Google is particularly impressive, and it is trading up over 7% on the news so far. It is still substantially below its April highs, but that will be in play now.
The easiest mistake to make in this market is to keep trying to anticipate a top. With these good reports and the Fed likely to cut rates next week, there is likely to be some good support in the short term. We'll see how well things hold up tomorrow, which will give us some clues as to the potential reaction next week when the Fed makes it move.
Have a good evening. I'll see you tomorrow.
Alphabet, Amazon and Facebook are holdings in Jim Cramer's Action Alerts PLUS member club.