Bears got what they wanted when they shaved off more than 200 points from the S&P 500 in just six trading sessions. The 6.8% fall caused investor sentiment to crumble, as investors worried about the trade war and a potential recession. But it was a different story in the stock market today — one where the bulls held the trophy.
Despite Monday’s nasty decline, stocks are actually higher on the week now. With both bulls and bears getting a taste of victory, where are we heading now?
Trading the Stock Market
Click to Enlarge As the S&P 500 was rallying, I shared a chart on Twitter in real-time mapping out the potential resistance. At 2,933, the index filled its gap from Friday and rallied to the underside of the 50-day moving average.
Now it’s in make-or-break territory for both longs and shorts.
Many bears who are reloading on the short side will likely use Friday’s high and the 20-day as their stop-loss. Bulls who are long or recently got long with will need to see the SPX hurdle the 50-day and reclaim the 20-day.
If it can get over the 20-day, it can fuel the S&P 500 back to $3,000. Below, the 20-day and 50-day keep the 100-day on the table at $2,903. Below that mark and bears will gain confidence to squeeze the index back to this month’s low.
I realize that’s a lot of “if-then” statements, but that’s all trading really is when you think about it.
It’s still somewhat bothersome that we didn’t get a test of the 200-day moving average in the regular-hours trading session. The mark was tested in overnight trading in the futures market. So unless the bulls can get this up over the 20-day and 50-day, I can’t rule out a test of the 200-day at some point.
Movers in the Stock Market Today
What a session it was in the stock market today. Investors saw huge gains in a number of stocks, starting with Roku (NASDAQ:ROKU). Earlier this year we wrote about why Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) should acquire Roku for $10 billion. It’s because of its momentum in video streaming.
Shares erupted more than 20% at one point, thrusting Roku to new highs and bringing its year-to-date gains up to 300%. The company beat on earnings and revenue estimates, provided robust guidance and showed that momentum is doing anything but slowing.
Advanced Micro Devices (NASDAQ:AMD) wanted some attention too, though. Shares climbed about 20% at one point on the day, but ended the day higher by “just” 16%. It wasn’t earnings that took it higher — in fact, earnings wounded AMD about a week ago. Instead, the company’s new server CPU and news that Google Cloud is using its Epyc processor sent shares roaring higher.
(Here’s how to trade AMD now, by the way).
Symantec (NASDAQ:SYMC) jumped roughly 12% on renewed speculation that Broadcom (NASDAQ:AVGO) is again interested in working out a $10 billion deal for SYMC’s enterprise business. Interestingly, AVGO stock is slightly positive on the day. Previously, the stock had fallen on news of its interest in SYMC. That said, it’s now lower than where it had fallen in early July on the news.
Kraft Heinz (NYSE:KHC) was crushed lower on Thursday, at one point falling almost 16% to new record lows. The company beat on earnings and revenue estimates, but it was other news derailing the stock. Organic sales were negative, KHC took a $1.2 billion write-down (on top of the $15 billion in write-downs it has already taken) and said it will file its 10-Q late. It also pulled its full-year guidance.
For a company with accounting issues, this is a no-no. On the plus side for bulls, today’s reversal showed some silver lining.
KHC wasn’t the only loser. Zillow (NYSE:Z, NYSE:ZG) took it on the chin Thursday, falling more than 15% after reporting earnings. The company beat top- and bottom-line expectations, but losses continue to concern investors.
Heard on the Street
There were a few notable analyst moves on the day, with Goldman Sachs making a few notes. The analysts downgraded Caterpillar (NYSE:CAT) to “neutral” and assigned a $130 price target. That actually implies about 7.5% upside in the name, as CAT rallied slightly on the day.
They also upped Dollar General (NYSE:DG) to a buy and assigned a $152 price target. Shares rallied ~2.5% on the day as a result. Before today’s move though, the target implied about 16.5% upside.
Despite the earnings decline, Disney (NYSE:DIS) was upgraded to buy at Credit Suisse, who assigned a price target of roughly $150. The stock jumped 2% on the day, with the target implying roughly 11% upside.