A little over two weeks ago the bears were anticipating a weak earnings season the would show that not even the Fed could save this market with lower interest rates. Trade wars and slowing economic growth were supposed to weigh on the numbers and send the message that valuations where stretched.
Like many trading plays it hasn't worked out the way it was supposed to.
Earnings have been solid and low expectations have helped stocks to perform well. The very strong report from Alphabet (GOOGL) is a good illustration of how the bears have miscalculated the response to earnings. Not even news of an antitrust investigation could slow down Facebook (FB) and Google.
Once it become evident on Friday morning that the strong earnings news was not going to generate a "sell the news" response it was steady buying the rest of the day. Stocks trended slowly higher on better than 5-2 positive breadth. Nearly 500 stocks hit new 12-month highs.
Despite this very good action we still are not seeing the sort of euphoria that usually accompanies a market at all-time highs with a supportive Fed. Maybe it's due to the prevalence of the computers these days but it is vastly different than the sort of mood that existed back at the top in 2000 and even in 2007. I'm not sure it is meaningful from a timing standpoint but it gives the market a different feel.
While earnings season continues next week, most of the important big-cap names have now reported and there is a shift to smaller-caps. That can be fun for trading but it has less impact on the overall market.
Of course we also have the Fed interest-rate decision next Wednesday afternoon. A rate cut is very well anticipated and traders will be trying to game the psychology of the news. If nothing else we will likely see some increased volatility.
Another issue that may cause some movement is the resumption of negotiations with China on trade next week. The U.S. delegation is on the way and there should be some of the typical platitudes about progress.
This market continues to chug along as is it doesn't have a worry in the world. The complacency is a bit worrisome but sticking with the trend has been the key to profits. Things could shift next week with the Fed on the agenda. Still, don't be too anticipatory.
Have a great weekend. I'll see you on Monday.