The market, like it does all too often, has laid my best plans to rest.
I discussed Wednesday how I hoped technology would remain depressed through the close of trading Thursday, so I could look for some long plays into earnings. My fear was we would rally, and I contemplated playing some of the names that reported Wednesday night instead. While buying Etsy ( ETSY) would have been great, Pinterest ( PINS) and ServiceNow ( NOW) played out very well on the long side. But with the Nasdaq 100 exchange-traded fund ( QQQ) up nearly 2% today, I will likely have to rethink my position going into the close.
Here's the rub: If we close higher, then it throws off my thesis. But if we sell off hard into the close, I'm going against a very strong end-of-day trend.Opening low and staying low is very different from opening on a position of strength and then reversing.
Rather than force things, I'll probably find myself a lurker, rather than a player, into the crazy amount of earnings we get tonight. Think about it: Starbucks ( SBUX) , a $100 million market, is 10-times, 15-times, and nearly 20-times smaller than three of the other companies reporting. We could also toss in 7.5-times smaller than a fourth. Apple ( AAPL) , Amazon ( AMZN) , Alphabet ( GOOG) , and Facebook ( FB) all report after the bell on Tuesday.
Speaking of Facebook, shares appear to be feeding off Pinterest ( PINS) today on top of Snap's ( SNAP) prior strength. It's hard to envision them not being a big winner, despite shouts for folks to delete their accounts, advertisers pulling spots, or complaints about freedom of speech. It's the same as virtually every social media name. People simply will not walk away. It's ingrained in our daily lives. Think about how often you refresh your email or Twitter ( TWTR) account or check Facebook. How do you feel when you're without your phone? The calls of social injustice are great, but for most folks, it's just talking.
Speaking of Twitter, it along with Activision ( ATVI) , and Atlassian ( TEAM) , among others, will get buried tonight. My head is spinning just typing these names let alone thinking about what happens when the reports begin to hit the wire. My current thinking is traders need to either stick with the QQQ or focus on two, maybe three names, and ignore the rest until the after hours session closes. I anticipate we'll have some volatile initial reactions followed by reversals similar to what we see on a Fed announcement day. In short, tonight be more entertaining to watch, much less stressful, and even save you a few dollars as you won't get caught chasing. Also, I think some winners tonight may get buried in the headlines, which should give folks willing to take their time and sort through the reports an opportunity to still get into names post-earnings.
One breakdown that has me caught a bit off-guard is gold. I know the Fed has struggled to get inflation moving higher, but at some point, they will have success. The market is forward-looking, so I expect gold will run long before we see actual inflation.
Overall, I'm not impressed by the day's action. It shapes up as a short-term oversold bounce and little more. I would stay with the notion that strong is strong for a reason. While I'm looking at some potential bottoms for trade ideas, own strength for the longer-term. The market should do a quick post-election reset on what Wall Street believes will work in 2021. Reset doesn't mean crash or correction, but I think we'll see pockets of very obvious strength and weakness. We should pay attention to those reactions as they will likely set our plan for 2021.
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