Despite selling in Europe and Japan the US Markets were able to reverse losses and end near highs of the session. The big story was the massive move FB made after announcing second quarter earnings. On the flip side, homebuilder PHM reported earnings the street did not like sending the entire homebuilder group lower. Sights were turned to after-hours earnings with a few big names posting earnings. Unfortunately, the after-hours weren’t as impressive as the day’s action suggested. Our uptrend continues to defy gravity and until we get signals suggesting we are rolling over we are sticking with the trend.
It is no secret we aren’t fans of the homebuilders. Nothing personal, but the price action had been week and yesterday’s action certainly confirmed the bearish stance on the group. Will the group continue lower is anyone’s guess, but shorting is quite difficult during an uptrend. Homebuilders have been leaders and to see them roll over like this is a red flag. We’ll certainly need to see more weakness among other market leaders along with market piling on distribution.
In after-hours we did have a few firms post earnings. AMZN missed across the board sending shares lower. Initially, the stock was down just a little over 16 points. The stock was able to recover majority of its losses even with missing their estimates. On the bright side, SBUX posted numbers the street was happy with moving more than 6% in after-hours trade. Two other disappointing stocks were SWI, EXPE, and ZNGA. On balance, companies have been able to beat EPS albeit on lower guidance.
Sentiment remains high with the number of AAII Bulls remain above 45 and the Bears remain in the low 20s. We haven’t seen Bulls get above 50% during this market rally and we could extrapolate a whole host of reasons why. It simply would be a fruitless endeavor. The NAAIM survey showed quite a bullish jump in Investment Managers survey at 87%. This is the highest reading in quite some time. One interesting antidote was there wasn’t any bearish positioning. Don’t be so quickly to call a top, this can change instantly. We remain in elevated territory, but not at extreme levels and we aren’t going to call we are at a market top here.
Get out and enjoy the last weekend in July.
