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The S&P 500 advanced 1.19% on Tuesday, putting the index within 1.5% of another record high as US corporate earnings topped expectations and US consumer confidence beat expectations. Equities were also boosted by a rebound in Emerging Markets, led by Brazil, as traders bet that the recent election-result selloff was overdone.
Earnings
According to data from Bloomberg, 61% of companies to have reported earnings so far this quarter have beaten their expected sales projections. On top of that, 80% of S&P 500 firms have reported numbers that topped analyst estimates.
This trend was seen in Parker-Hannifin Corp. yesterday which raised profit estimates and saw its stock price rise by almost 5%. As well, Amgen Inc, increased its sales forecasts and saw shares jump 6.1%. Yahoo! Inc. also climbed 2.6% to record a run of 9 straight daily gains.
The strong results have continued overnight with Facebook reporting analyst-beating EPS numbers after the market close. Facebook EPS came in $0.03 higher at $0.43 and this should propel stocks to further gains overnight.
It hasn’t been all good news in the Internet sector however. Twitter Inc. dropped 10% on Tuesday after reporting another quarter of decelerating customer growth.
Technicals
The S&P 500 opened just above its pivot on Tuesday and proceeded to move higher throughout the day in what turned out to be a great session for bulls. The Index cruised steadily higher as earnings numbers continued to top estimates and eventually closed right on the second resistance around the 1,984 level.
Looking forward, we see the S&P 500 moving higher today and see the risk of a trend reversal as low. However, on longer term horizons, we are still bearish and are looking to go short in the 1,960-2,019 range with a view to holding the trade back down to the 1,730 mark.
This is in light of most daily indicators showing bearish inclinations while the 1,730 target level can be traced back to a downward trend line. The resurgence of geopolitical tensions, particularly in Ukraine or Iraq, could easily stoke further downward pressure over the coming weeks.
Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk
