Led by MSFT the NASDAQ led the market higher. Existing home sales disappointed, but the disappointment wouldn’t last very long. Buyers did not have much resistance as sellers weren’t putting up much of a fight. Volume was light even with the solid price gains. MSFT jumped on news of a large position by a big fund. AAPL joined in the fun even though the stock was unable to close above $400. Attention would turn to the after-hours session with earnings from NFLX. The NASDAQ did regain its 50 day moving average, but with the light trade the index remains stuck in neutral.
NFLX jumped nearly 50 points in the after-hours session after posting first quarter earnings. The stock has roughly 2.2 days to cover and 13% of it float is short. A tricky situation with this earnings gap is how far the stock will be above its 200 day moving average. The stock will likely open more than twice its 200 day moving average. Typically, small caps stock will top out when it trades north of 2x its 200 day making this earnings gap one that would be very difficult to trade.
The past two trading sessions has been quite the snap back from last week’s selling. At the highs today the NASDAQ retraced nearly 62% of the move off the recent highs set in April. Tomorrow we’ll get a read on New Home sales then we’ll see earnings from AAPL after the bell. Earnings season is not inspiring a big growth story in the economy. Like the CSX CEO stated the economy will grow at best 2% within a 1-2% range. How will the market react will be how we look at the situation rather than what we think the market will do.
Remember to cut those losses short and ride your winners.
