The best counter-trend bounces tend to occur after a down open or some fairly aggressive selling. That was not the case Thursday, as the market was caught by surprise when Meta (FB) turned out to not be as bad as expected. The stock helped to drive a gap-up open, and then after a brief pause, it was steady buying the rest of the day.
It was a classic oversold, counter-trend movement, with sizable gains in all the indexes and breadth of around 6,200 gainers to 2,000 decliners. Despite the strength, there were still over 1,250 stocks hitting new 12-month lows, but many of them reversed intraday and created candlestick patterns known as hammers.
Can the bulls build on this move? That will depend on the reaction to some key earnings reports on Thursday night.
Amazon (AMZN) numbers are mediocre, and guidance is light, which is causing the stock to trade down around over 8% immediately after the release. Intel (INTC) numbers look OK, but second-quarter guidance is light, and the stock reversed down 5% after hours.
Apple's (AAPL) numbers are solid, and the company announced a sizable share buy-back. The initial reaction is positive, with the stock trading up around 3%, but fading a little.
The reaction to these reports will shift overnight, but they are very different setups than what drove Meta. We have not had very many "gun and run" reactions to positive reports, and it doesn't look like that is what we are going to see tonight. This market is still struggling to discount an unprecedented number of negative macro events, and it is not easy to do.
The bounce is a positive technical step, but it is going to take much more work for a solid low to form. The recent lows now become key support levels, and if they fall, it is going to really create some negative sentiment.
Ironically, the weak Gross Domestic Product numbers Thursday could help to make the Fed less hawkish, which would be a market positive. But all indications are that we have a half-point hike starting next week.
Stay patient, vigilant, and flexible.
Have a good evening. I'll see you tomorrow.