foxex: Big 4

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Chart Advisor | Focus on the Price

By Gordon Scott, CMT

Thursday, July 30, 2020

1. Stocks start low but end higher as the big four release positive reports

2. Big tech companies surpass already lofty expectations

3. What if the Nasdaq 100 falls tomorrow?

Market Moves

The biggest and most important moves in the stock market today came after the market had closed. Four of the most influential stocks reported earnings. The charts below give an indication of the initial reaction in after-hours trading. The numbers were excellent and surpassed expectations in all four cases. A quick post-market snapshot of each company is shown below: Facebook (FB), Amazon (AMZN), Alphabet (GOOGL), and Apple (AAPL).

Big Tech Companies Surpass Already Lofty Expectations
In hindsight it kind of makes sense. These four companies, more than any others, were likely to benefit from the shut-in economy. Even so, the results from each company surpassed the sky-high expectations investors had priced in. Each of the companies was trading one to five percent higher after releasing their reports.

This appears to be a notable contrast to the way investors took good news from Microsoft (MSFT) and Tesla (TSLA) and decided to take profits directly after their surprisingly good reports. It will be hard for investors to ignore the pull of investing in these companies going forward. Quite clearly, they have become the heavy-center of the economy now.

And if this good news isn't already enough, Apple announced a 4-for-1 stock split to make their shares more accessible and affordable to the small investor. This is an interesting tactic as it might actually draw a little attention away from Amazon, Alphabet and Tesla, all three of which are priced in four figures.

Read more:

Facebook Earnings: What Happened

Amazon Earnings: What Happened

Alphabet Earnings: What Happened

Apple Earnings: What Happened

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What if the Nasdaq 100 Falls Tomorrow?

Together, these four companies account for roughly 25 percent of the weighting on the Nasdaq 100 index (NDX) and 10 percent of the weighting on the S&P 500 index (SPX). In fact, the Nasdaq futures were up well over one percent immediately after all four reports were released. It is most likely that this will hold and that indexes will be up tomorrow. However, what if they aren't? Or alternatively, what if the market sells off and falls lower tomorrow?

When the market does something unexpected, chart watchers know to sit up and take notice. Were these stocks and the major indexes to fall tomorrow, that would be a sign that large investors felt a pressing need to exit these positions and take profits while they can. It would likely touch off a lingering move lower, which might then be an excellent buying opportunity. Such contrarian thinking can generate fabulous trading opportunities for those who know to look for them.

The Bottom Line

The four big tech companies that reported earnings all surpassed expectations, and share prices were up in after hours trading. These stocks are so influential on the major benchmark indexes that it is quite likely those indexes will rise further tomorrow. If for some reason the indexes should fall, it would be a noteworthy occasion.