We Had Fantastic Economic Numbers And Super Earnings From Big Tech, What’s Next? (NDX)

• January Employment nearly double the expected result at 353,000
• Not only that but the prior 2 months were revised up an additional 126,000
• Unemployment remains at 3.7% staying below 4%, a streak unbroken since December 2021
• Average hourly earnings jumped by 0.6% in the month and a 4.5% year-over-year rise

Federal Reserve Bank of Atlanta’s GDPNow estimate for first-quarter gross domestic product is running at a 4.2% annual pace. Though the Atlanta Fed tends to be on the high side of such projections, in my opinion, it is something to note.

Great earnings news last week

As far as earnings Amazon (AMZN) beat with $170 billion in revenue and $10.6 billion, the all-important represented a 13% jump in revenue, and online retail business earned $70.5 billion in revenue during the quarter, a 9% jump Meta Platforms (META) earnings was so strong the stock leaped 20% the largest market-cap rise in stock market history, Sales in the fourth quarter jumped 25% year over year, while expenses decreased 8% year over year to $23.73 billion. On top of all that META announced a dividend. Microsoft (MSFT) all exceeded earnings and revenue Earnings: $2.93 per share, vs. $2.78 per share expected, Revenue: $62.02 billion, vs. $61.12 billion expected

Apple (AAPL) not-so-fantastic revenue of $119.6 billion, up just 2 percent year over year, and quarterly earnings per diluted share of $2.18, up 16 percent year over year. The good news is the iPhone is up 6% likely for higher prices, not unit sales. Yet AAPL didn’t fall as hard as one would imagine given that China’s poor iPhone sales are a sustained issue. The company saw four consecutive quarters of year-over-year declines in revenue before this report.

Alphabet (GOOGL) Earnings: $1.64 vs. $1.59 expected by LSEG, Revenue: $86.31 billion vs. $85.33 billion expected by LSEG. Alphabet reported its fastest quarter for revenue growth since early 2022, with sales climbing 13% from $76.05 billion. Google Cloud: $9.19 billion vs. $8.94 billion expected. However, ad revenue of $65.52 billion trailed analysts’ estimates of $65.94 billion, according to StreetAccount. We will return to GOOGL later.

Can it get any better than this?

The US is the undisputed champion of the economies of the world. The US big enterprises are the most profitable, and fastest growing. The US has falling inflation and is creating oodles of jobs to boot. The stock market couldn’t want better conditions for growth, and it is better than Goldie Locks, in the fable had to eat porridge too cold, and too hot before she found out that was just right. So that leaves us with this notion;

the S&P 500 Index has climbed in 13 of the last 14 weeks, its best stretch in nearly four decades. I have been highlighting the chances of a sell-off later this month and into March. Last week I highlighted that February, historically one of the rockiest times of the year for US stocks, is never a sure thing. Let me set up that chart again… Here I’m using the Nasdaq-100 from last week, where the drops are more pronounced

The S&P 500 has similar patterns, here is the chart with similar drops that I just drew now.

Of course, not every drop here started in February/March, we know that September/October and early November tend to be the worst months for stocks. What can roil the stock market after such good news? Well at the time of this writing, Powell confirms that there will be no cut in March on 60 minutes. In the last two weeks, I wrote two successive articles warning about the FOMC statement, that we could have the market selling off which they did on Wednesday. If you followed along then you were ready to purchase stocks on sale Wednesday and perhaps trade out of them on Friday. The reason for that is the economy is practically roaring so on the surface there’s no need. My long-term readers know that I watch the indexes and lest they rise too sharply and become unsustainable. Right now, the Nasdaq-100 ETF (QQQ) looks extended but according to Tipranks the RSI for the QQQ is neutral at 55.03, going above 70 RSI would be determined to be overbought. Let’s bear in mind that it’s only February 4th. Now that a little time has passed the futures are flat, and the notion that there will be a cut in March has been fully discounted. So we could easily see stock market participants get very excited with all the ways the stock market is perfect. So here is my position on the market now.

I think it is more prudent to trade this market than to invest in it

Many stocks could be picked up in the growing excitement that I think will gain momentum in the next several weeks. However, before we get to that, if things are so good what can hurt this market? Well, now that good news has become good news, what happens if there is a bit of bad news? Now that Powell has foresworn rate cuts in March, perhaps the Fed is not going to come to the rescue quite so quickly if the economy falters. Perhaps there will be no cuts this year at all? The base case as I have been saying for a while, is that we see a cut in rates, in November. Market participants will always go to the extreme, and any piece of news pushing inflation, or a drop in growth will bring the dislocation no one expects, and voila! You have a 7% drop. I closed out of all my hedges, and single stock downside trades (via Puts) because I didn’t want to have Theta decay. I would rather see how the market is trading before I reset them. I will look to hedge further as February gets closer to the end. Right now, I think there could be some interesting “Catch Up” trades. So let me chart some names that I am not currently in, that I think might be viable for a trade.

Select trading ideas

The only name that I am currently in as a trade is DraftKings (DKNG). The others are proposed ideas, that I might get involved with. As always, I’ve charted none of these names beforehand. Even DKNG was a name that I bought calls in for a trade after just watching the price action several weeks ago, and being mindful of the coming Super Bowl season.

The best catch-up trade would be GOOGL. I think their revenue estimate beat for their cloud services GCS and jumped 26% to over $9B for the quarter making GOOGL a true player in the “Cloud Wars”. This is double AMZN’s AWS, and if this growth rate continues GCS might take share from MSFT Azure as well as AWS. Right now the market is wide open and there is plenty of room even for other players like Oracle (ORCL), or even an Akamai (AKAM) to grow and not impinge on individual market share. Even acknowledging that GOOGL is now well part of a triumvirate, especially for AI applications using BARD and GEMINI. I would look for GOOGL to jump as high as META, or even AMZN, but for a trade looking for several points, the chances are very good for success. Let’s look at the chart.

How about instead of a pure “Catch up” trade, one that could also be a momentum trade? I am already in this name, and with all the excitement regarding the Super Bowl, I will reduce my position on Friday. I am talking about DraftKings. I had to go back 4 years to contain the entire formation. This is a monster bearish to bullish formation…

Where do I think DKNG is going, certainly several more points should be pretty easy to attain as long as the overall market remains stable.

Amazon jumped 7% on Friday, so how is it a catch-up trade? You might be shocked by this notion but Amazon also has the possibility for greater gains. Believe it or not, AMZN also has a “monster” bearish to bullish reversal going on.

Back in 2021, AMZN hit 188, and I see no reason why it wouldn’t hit that level in the next 10 trading days. What’s more many technical traders will wait for AMZN to exceed 188.11 and close above that level before they pile in. Why? Because there will be no overhead supply to impede higher highs. Of course, the stock at some point becomes overbought, and the stock will base again. Kudos to Andy Jassy for imposing some discipline on expenditures, and still being able to grow the businesses for the benefit of the shareholders. If you chose to buy shares in this name instead of trading it via Call options please bear in mind that this is the kind of name that could quickly lose altitude, so buy small and add over time. Can AMZN blast way higher? Yes, but the year is yet young and trees don’t grow to the sky. There will be a moment when stocks will take a rest, and you can add this initial position then. I would say this for every name highlighted here.

Here is a stock that I would not be buying this week purely from a chartist’s point of view. This would be the king of all media – Netflix (NFLX).

As you may have gathered from prior articles, I am becoming more and more of a believer in charting. It doesn’t always work but, if you use it as a filter and combine it with other factors like narrative, and in the aftermath of earnings you can set up some nice trades.

Happy trading!