On Wednesday, some solid earnings news and a dovish Jerome Powell failed to drive the senior indices higher, but speculative trading in small-caps did improve. It was a mixed bag of action, but the inability to generate better momentum on positive news was a little bit of concern.
The indices have another opportunity Thursday morning as both Facebook (FB) and Apple (AAPL) have put up very solid numbers. The Nasdaq 100 (QQQ) is set to jump about 0.8% on the news. Bonds also seem supportive as they rebounded after a dip on the FOMC policy decision and Powell's press conference.
The question we have now is whether these good earnings reports can generate some sustained momentum. There has not been much lasting positive reaction to earnings so far. Names such as Microsoft (MSFT) and Pinterest (PINS) were unable to shake the selling that hit on generally good news, and Alphabet (GOOGL) ended up closing at intraday lows after its blowout report. We need Apple and Facebook to finish strong to show that there are some willing momentum chasers.
Small-cap and speculative trading action continue to be frustrating. The overhang on the group lifted about a week ago, and there have been some good bounces, but it reappeared earlier this week. The action was better on Wednesday, but many stocks are struggling to overcome some technical overhead that has been created in the last two months. Stock-picking is improved, but it is still narrow, and there is limited sustained momentum.
Amazon (AMZN) , Twitter (TWTR) and dozens of other companies report Thursday night, so the focus will stay on earnings. So far, it has been a very strong earnings season, but the price response has not been that strong. That may be due to some overbought technical conditions, but ultimately good numbers will help provide some support.
We have oil jumping Thursday morning. Bitcoin is consolidating, and gold is still struggling to generate better momentum. I'll be looking to small-cap stock picking as the best measure of overall market health. There is plenty of good news out there, but the overbought technical conditions present a challenge for the indices.