Will Volatility Take ‘Bite’ Out Of FAANG Reports?

2021-01-25

Volatility ruled the session Monday as the stock market faced uncertainty with economic stimulus, continued vaccine distribution issues, and a wave of upcoming earnings reports.

The Dow dropped more than 400 points by 11 a.m. before clawing its way back to 30,960.00 at the close for 136.98-point drop. The Nasdaq was choppy at the open, gapped down 300 points in concert with the Dow, and then climbed all afternoon to close up .69% at 13,635.99. The S&P 500 followed the same gap-and-spike pattern before chopping its way to a .36% gain to close at 3,855.36.

This kind of action doesn’t provide confident support of the larger bullish expectations and it’s early in this environment to pinpoint whether this is the start of a bigger turn in favor of the bears.

The prospect of a wildly up and down market looks to be the norm for the short term in the market.

Simpler’s traders are treading cautiously into the volatility and the swell of earnings reports. More than 100 companies are expected to deliver earnings, including the FAANG stocks — Big Tech companies FB, AMZN, AAPL, NFLX, and GOOGL.

Market indicators are still leaning bullish with an air of caution with questions about just how extended the market is in this environment.

Key sectors and stocks are showing weekly setups poised for breaking out which indicates behavior not necessarily showing a market ready to roll over.

Simpler’s traders are focusing on these key elements while watching the indexes which may be hiding more risk than is initially apparent. While not entering into a “chicken little” mode, our traders are working to anticipate any rain that might lead to a downpour.

Today’s action may just be shaking out “weak hands” in the game and time will tell if this will stabilize to the downside.

Always be prepared for anything and keep tabs on the slew of earnings reports.

We Saw: Wild open for the week leading into earnings — 

  • Questions of whether economic stimulus creating market bubble
  • Wild stock speculation and surge in options volume
  • Market strength, yet signs of a pullback possibility

We’re Watching: Compression, squeezes, impending direction —

  • Calculated risks in volatility for higher gains
  • Not risking more than we care to lose
  • Setups in: SDC, VOLD, ADD, PTON, PLUG