STTG Market Recap January 22, 2013

After a holiday for MLK Day, investors returned to the same bullish market Tuesday.  The same pattern of morning selling and afternoon strength continued as traders bid up stocks in the closing few hours.  The S&P added 0.44% and the NASDAQ 0.27%.  After the close, IBM (IBM) and Google (GOOG) both reported earnings that satisfied the Street; both stocks jumped substantially in after hours – more later in the recap.

One can see the S&P 500, after a basing pattern for most of January, has made a slow and steady jump the past three sessions.  It once more is fast approaching the top end of this ascending channel and is steamrolling all shorts in the way right now.

The NASDAQ continues to lag but tomorrow should get a boost from Google – also Apple reports after the bell tomorrow so that will dictate the near term movement of this index as there is generally a large move in the stock post earnings.

With today’s rally the McClellan Oscillator is reaching the top end of a recent range.  As always the market can rest through time or price – in January it has been through time (i.e. sideways consolidation).  Near term, things are getting overheated.

Oil continued its recent rally ….

…. which has helped the oil service stocks take over recent leadership.

Transports have taken over the mantle as hottest sector in the market from financials.

After the bell we had positive earnings from Google (GOOG) – up nearly 5% in after hours, and IBM – up over 4% in after hours.  Bespoke Invest has this interesting blurb about the impact of IBM on the market – keep in mind this is a Dow Component and that index is weighted by stock price.  So the larger the stock price the more impact; hence IBM is a major overweight for the Dow.

Google is trading in the $730s while IBM is trading in the $204s:

Via Bespoke

The chart below shows the S&P 500 during 2012, along with the index’s performance in the five weeks (approximate duration of earnings season) following each of IBM’s four earnings reports.  Following the two earnings reports where IBM saw a positive one-day reaction to earnings, the S&P 500 traded higher (3.7% in January and 3.0% in July).  Likewise, after the two earnings reports where IBM saw a negative one-day reaction to earnings, the S&P 500 traded down over the following five weeks (-5.3% in April and –4.6% in October).

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