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Critical Test For the Market - Tech Weakness and PMIs

Posted by Pete Stolcers on April 30

Posted 9:30 AM ET – Yesterday the market inched its way to another all-time high. Google reported earnings after the close and Apple will report today. These are the final mega cap tech stocks to announce and sellers will get a little more aggressive after the news. The headwinds are blowing and gains will be hard-fought.

Google missed its numbers and revenues grew at the slowest pace since 2015. The stock is down 7% this morning. Apple could disappoint after on Samsung’s 57% drop in first-quarter net income. Many analysts are expecting strong service revenues from Apple, but they only account for 20% of sales. Financial stocks caught a bid and that is encouraging for a market that needs participation from other sectors.

China’s Caixin factory PMI fell to 50.2 from 50.4 last month. This is not a big drop, but it spoils the notion that conditions in China are improving. Eurozone growth for Q1 came in at .4% which is better than .2% in Q4. The uptick is nice, but growth is dismal in the EU. Japan could report a decline in economic growth (contraction) in Q1. Official PMI’s will be reported tomorrow.

Investors are still riding the strong 3.2% GDP growth number reported last Friday. They will remain calm as long as domestic economic growth stays strong.

The FOMC will release its statement tomorrow. Dovish news is expected.

Trade negotiations with China continue and we could see a deal in the next few weeks.

Swing traders should remain in cash. The upside rewards are smaller than the downside risks. The back half of earnings season should be lackluster. I don’t like buying at this level and I will wait for a dip.

Day traders should look for opportunities to get long once the downside has been tested. Momentum is still intact. After today I believe the selling pressure will increase. There is a good chance that Apple will disappoint and I don’t believe the market has the strength to shoulder more bad news from the tech sector (Intel and Google misses).

Look for a final push higher today and a soft patch for the next few weeks.
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