24 Jul 2022 SPX Weekly - Giant Tech Earnings
Accuracy: 25/30 (83.33%)
SPX above 3750 - Correct
Last Week
We had a pretty good rally until the end of the week, staying above 3750 was pretty clean call there.
But thanks to snapchat (SNAP), repeating its earning crash almost like what happened in the previous earnings. SNAP's earnings crashed more than 30% and caused a pull back on the market as seen in the red arrow on the SPX chart above.
On the daily candle chart, SPX did break the short term downtrend resistance line last week. Closing with a red candle, almost a bearish engulfing, showing resistance in a previous bearish gap we had few weeks ago.
Not only that, if we draw a Fibonacci from the previous high. The current resistance area also falls right on the 61.8% mark. It does seems we have quite a few supporting technical points that the current resistance area is pretty strong.
Next Week
We first identify the key areas of support and resistance, with 4170 as the very important resistance area above. If we ever break upwards of 4170, it will form a higher high and can be a pretty bullish trigger. Many eyes will be looking at this area for sure.
As for support, which is our lowest point for this bear market at 3636. A nearer support would be same as my prediction last week around 3740-3750 area.
Since we have several technical points on the current area being a strong resistance, I kinda lean towards the bearish side for the next week. At least we should see some struggle in the current area.
But what's gonna be exciting is not just technicals, what's below will be the key catalyst for next week.
Economic Calendar
Once again we have the FOMC and Fed Interest Rate. This is pretty much a follow up action from the recent CPI release. Which so far the market is pricing in peak inflation and is anticipating inflation might be coming down soon, therefore the rally right after CPI release.
This is because commodity and energy prices are coming down, many analyst are already calling a potential market bottom. If CPI starts to come down, Feds will get less aggressive on their interest rate, many early signs of a market reversal seems to start getting speculated.
That's not the end yet, next week is gonna be even more exciting with Giant Tech Earnings!
Giant Tech Earnings
2 weeks ago we started with banks earnings, followed some high profile companies last week as I mentioned in last week's post. TSLA and SNAP seems to be the bigger market movers last week.
Next week is gonna be huge, as usual in all earnings season, we are gonna have many giant tech earnings.
Not only we have most of the the mega cap earnings next week, there are also plenty of large cap. Basically a large group of S&P500 is having earnings next week.
With SNAP giving the bad start, people are looking at META which falls in the same communication sector. Personally, I always don't understand why the market or sector get influenced by SNAP that much just because of the similarity in advertising revenue. If we look at their size, META is sitting at over 400 bil market cap while SNAP is less than 20 bil. So to me it has more overreaction than real impact.
But that said, a lot still depends on what these companies gonna say in their earnings, how they project their next quarter, how they respond to the inflation topic etc.
Prediction
Putting together all the information above, I kinda have a personal bias here. My storyline is - inflation peaked, FEDs get less aggressive, companies will have better projection for next quarter. Which means more positive news than negative news coming, led me to be on the bullish side.
Pulled out the 30 minute chart again to recap the support areas below. We have 3920 as the very near support and 3740 next. I would think SPX will continue moving down to find support, probably and hopefully at 3920. Then FED and Giant Tech Earnings will start the bullish rally.
To be safe I guess I'll go with 3740, similar to last week.
SPX above 3740