Friday's selloff in equities notwithstanding, the major averages all posted substantial gains on the week. But with a busy week of economic data and earnings ahead of us, I doubt anyone is wasting a moment reflecting on what already has occurred.
If we take what we saw from Netflix (NFLX) and Snap Inc. (SNAP) at face value, investors are willing to give companies the benefit of the doubt if they report numbers that, while maybe not great, are at least better than expected. NFLX reported a massive decline in subscribers, but the number reported was still significantly smaller than what most analysts feared. In SNAP's case, the company's business appears to have gone from bad to worse and was made worse still by Snap's failure to provide forward guidance. This week's earnings calendar is busting at the seams, so we'll know soon enough what investors are willing to forgive and what they refuse to tolerate when it comes to performance and forward outlooks.
One thing that's likely to get an annoying amount of airtime this week is Treasury Secretary Janet Yellen's comment on Sunday on NBC's "Meet the Press" when she told host Chuck Todd that while the economy is slowing, she doesn't see signs of a recession. Secretary Yellen acknowledged that while many economists consider a recession to be marked by two consecutive quarters of negative GDP growth, and there is a strong possibility that this week's GDP report will be negative, she still doesn't believe the U.S. is in a recession.
Secretary Yellen's comments on a potential recession to Chuck Todd will be repeated for a straightforward reason. At the end of May, Secretary Yellen admitted to CNN's Wolf Blitzer that she misjudged the threat inflation posed when she called it a "small risk, manageable, and not a problem." Time will tell regarding the accuracy of her comments on a recession. Suffice it to say that Secretary Yellen was wildly incorrect in her view on inflation.
Moving on to the trading session here on Monday, Friday's decline, while bothersome, didn't break the short-term uptrend in the Invesco QQQ Trust (QQQ) . While very short-term traders likely will continue to key off a 5-day exponential moving average (EMA) and the $300 level, I would avoid moving back to a bearish posture prematurely. For me, prematurely means giving up on the bulls while price is still above a 21-day EMA.