A "not as bad as expected" earnings report from Meta Platforms (FB) combined with very negative sentiment and oversold technical conditions helped trigger a countertrend bounce on Thursday. However, a mixed reaction to earnings from Amazon (AMZN) and Apple (AAPL) has already reversed the momentum.
The market was due for a bounce, but the conditions were not quite right for a sustained move as the reaction to major earnings news prevented fear of missing out from building and generating further upside momentum.
The report from Amazon helped to illustrate that there are still big economic hurdles, and the market has yet to fully discount what is happening with both inflation and economic growth.
The surprise miss in GDP on Thursday made the economic picture even more uncertain. On the one hand, a slowing economy may help to slow inflation, but on the other hand it is possible that we are moving into a period of stagflation with high inflation and low growth. The market has yet to figure it out but will be looking ahead to a Fed rate hike of a half-point next week.
Apple had a good report Thursday night but noted is it experiencing supply chain issues, especially with semiconductors, and the stock is giving back most of Thursday's gains. If Apple can't sustain an upside move on that report, then it is very likely the market will be unable to generate momentum.
At this point, I'm looking for a setup for another countertrend bounce. I'm not even going to think about the possibility of a market bottom until we have a good rally or two.
The Federal Open Market Committee (FOMC) interest rate decision next Wednesday afternoon is going to be an event with the potential to create a significant market move. It is very well-anticipated that it is going to hike, but it is a potential "buy the bad news" event that traders may make self-fulfilling.
We will see if there are some dip buyers ready to jump on this soft open, but I'll be surprised if they are able to generate much sustained momentum today. The big event is the Fed news next week, and I don't expect to see too much positioning today.