By Graham Summers, MBA | Chief Market Strategist
Today will be a critical day for the markets.
Stocks are rallying hard this morning on Meta’s (META) and Microsoft’s (MSFT) fantastic quarterly results. META posted a double beat with revenues of $47.52 billion, beating the expected $44.83 billion, while adjusted EPS hit $7.14 beating analyst estimates of $5.90.
MSFT also posted a double beat, with revenues of $76.4 billion, exceeding the anticipated $73.81 billion, and adjusted EPS of $3.65, beating the consensus estimate of $3.37.
META shares are up 11% in the after-hours while MSFT is up 8%. And given that they are the 2nd and 5th largest companies in the S&P 500 index, these moves are dragging the overall index higher.
What happens here is critical.
We’ve previously noted numerous red flags for this market rally off the April lows. Specifically, we’ve noted that:
- The S&P 500 has formed a clear rising wedge formation. Stocks must now go parabolic to the upside or correct. With the market up 30% from the lows, and overbought on a daily and weekly basis, the odds favor the latter outcome.
- Stocks are extremely extended above key moving averages. Historically, this degree of overextension above the short-term and intermediate term trend has resulted in a period of consolidation if not a short-term top.
- Market leading metrics (high yield credit, breadth) have begun to roll over, suggesting stocks will do so soon.
- Historically, August has been a poor month for stocks during a President’s 2nd term. As Ryan Detrick has noted, the average August performance under these conditions is DOWN 3.4%.
And finally…
- Other companies, most notably Visa (V) and Alphabet (GOOGL) have seen their shares slide after posting fantastic results.
In light of the above issues, what happens with MSFT and META shares today will be vital to note. If they cannot hold on to their after-hours gains, we’ll know that this market rally is indeed exhausted and that it’s time for a correction.
So, keep an eye on both… I certainly will be!
It stocks begin to break down, the most critical question for investors will be:
Is this just a dip that should be bought… or are stocks about to roll over and REALLY collapse?
To answer that, we rely on a proprietary market timing trigger that has caught every market meltdown of the last 45 years. We detail it, how it works, and what it’s currently saying about the markets in a special investment report How to Predict a Crash. If you’re looking for a clear signal of when to get out of the markets, this is it!
Normally we’d sell this report for $499, but in light of what’s happening in markets today, we’re making just 99 copies available to the investing public.
To pick one up…
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
