Thursday was a decent day as some of the indexes made a move out of the "bull flags" they had been building but the NASDAQ lagged due to Intel (INTC) and after hours both Google (GOOG) and Microsoft (MSFT) posted earning reports that disappointed. More on that later. Bernanke was facing the Senate today but added nothing new and quietly made his way out, seemingly for the last time as he heads towards retirement from the post. Weekly jobless claims dropped by 24,000 to a seasonally adjusted 334,000, its lowest level in four months. The S&P 500 gained 0.50% while the NASDAQ added 0.04%.
The S&P 500 broke out of this bull flag we have cited the past few days but rather than finish at or near highs it finished in the middle of its range, which denotes uncertainty and is called a "doji". (Cute name) It did finally get over the intraday highs of late May so holding that level go forward will be a key first line of support. With the issues with Microsoft and Google after the close it will be interesting to see if the index can hold its breakout level or if we will see a failure back into the flag tomorrow.
The NASDAQ was hurt by Intel so had a small push out of its flag and immediately failed.
Contrast this to the financial ETF (XLF) which was helped by a report from Morgan Stanley (MS) and finished at the top of its daily range, something one would always prefer to see for the indexes as well.
We've been flagging oil lately and it also pushed out of its bull flag - eventually this is going to cause pressure on the market, especially areas exposed to the consumer. One never knows when.
On the good side of the ledger were the transportation stocks which had a nice session - they had been lagging as other indexes surpassed May highs, but today finally did the job.
We had mentioned technology as an area of potential rotation earlier this week but one can never account for earnings. Here are 4 different companies, two that reported yesterday and two today after the bell and all had issues. First Intel and Ebay (EBAY). Sometimes we get clues to the action, sometimes we don't. In the case of Intel, the chart was weak - the stock never made any attempt to get back to the May highs even as the indexes did; in fact it was soundly rejected at the 50 day moving average - so not a name one would seek if they are looking for strength.
Intel said Wednesday that its second-quarter revenue was $12.8 billion, down 5 percent from a year ago. That was just below the company's own projections as well as analyst expectations of $12.9 billion, as polled by FactSet. Earnings also declined. For the current quarter, Intel expects revenue of $13.5 billion, plus or minus $500 million. Analysts were expecting $13.7 billion. Revenue in last year's third quarter was $13.5 billion. Intel's new CEO, Brian Krzanich, said the company has been slow to respond to the shift in consumer spending from PCs to tablets and smartphones, but intends to make up for lost time.
Ebay was a little better as it broke out of a downward channel but it too had failed (just by a bit) to get back to May highs.
Ebay handed in current-quarter and full-year guidance that were below estimates, with CEO John Donahoe warning of economic "headwinds" in the second half of the year from Europe and South Korea. In addition, at least five brokerages slashed their price target on the company.
Today after the bell both Google and Microsoft reported earnings. The blue arrow shows where the stocks are trading in the afterhours. Unlike the 2 charts above, Microsoft had done everything right - a break of its downward channel and a break over May highs. But earnings season wrecks havoc on many a chart.
Google had also broken out of this triangle pattern and looked quite positive a few days ago but acted poorly yesterday and today ahead of the report - finishing in the bottom half or third of its daily range. Now the stock has some work to do to get back in good graces.
As always technical analysis can give us a guidework but news flow is news flow and can change things on a dime, hence you always take a risk holding into earnings - both to the upside and downside.