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GDP Was Great But Intel Could Keep A Lid On the Rally

Posted by Pete Stolcers on April 26

Posted 9:30 AM ET – The market has been treading water at the all-time high and traders are hoping that strong profits will push it through. Mega cap tech stocks have reported this week and the results have generally been good. Domestic economic conditions are strong, but they are soft globally.

Microsoft and Facebook posted strong results yesterday and the market was not able to stage much of a rally. Amazon posted huge results after the close and the stock is up 2%. Perhaps the bigger news is Intel. They lowered guidance for the entire year and cited a decline in data center chip sales. The stock is down 8% and Intel has broad reaching implications across the semi-conductor industry. Cyclical stocks have not performed well and 3M weighed on the Dow Jones industrial average yesterday.

Mega cap tech stocks can’t do it alone. Financials have not rallied, industrials are soft and energy has paused due to higher than expected oil inventories. I believe the market bid will remain strong through next week.

GDP exceeded estimates this morning and it was up 3.2% (2% expected). Without the government shutdown it would’ve been even better. The S&P 500 rallied 5 points on the news. Unfortunately, Japan could post a negative GDP. It is the third-largest economy in the world. Germany (the fourth largest economy in the world) narrowly escaped recession territory when it posted a meager gain in GDP last quarter. Asset Managers are pinning their hopes on a recovery in China where the data has improved slightly in the last month.

The trade talks with China are progressing and a deal is expected in May.

Swing traders are on the sidelines and we sold the SPY at $293 earlier in the week. Stocks are priced for perfection and Intel might put a kink in the armor of the tech sector. I believe that the upside rewards are smaller than the downside risks and I want to stay in cash until we get a pullback or until it is certain that economic conditions globally are improving.

Day traders should look to short a rally early in the day. The bid has been checked every day and I believe that Intel’s miss will attract sellers. As good as Amazon’s number was, the stock is only up 2%. Once the market finds support look for buying opportunities later in the morning. We should expect a decent range today, but not much of a net change.

Focus on earnings releases. There are lots of opportunities. Option Stalker has great searches and indicators to help you zero in on the best prospects.
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