Momentum Monday - The Three G's (Google, Goldman and Gold) Beating The Three Q's ($QQQ) ...Will It Continue?

ll major indexes had a big bounce after the selloff the week before. Now they are at or approaching potential resistance where sellers might show up again. 430-435 for QQQ, 199-200 for IWM, 508-510 for SPY. How they behave around those levels will depend on the market reaction to earnings. Apple, Amazon, and AMD are just a few of over 800 companies that report next week.

What do we know about earnings season so far? The stocks that were priced for perfection are very vulnerable. Going into last week’s report, META was a big earnings winner for five quarters in a row. Sentiment was extremely bullish. The company gave a soft guidance and it was obliterated. It dropped from 500 to 400 overnight. Granted dip buyers stepped up and it finished the week at 440. This is just another timely reminder that there are no sure things during earnings season. Strong companies that seem invincible that drop 20%. This is why I don’t like to sell options premium ahead of earnings events. It doesn’t make sense to try to make $3 if the downside might be $50 per option contract. I’d like to be on the other side of that bet.

Google was on the other side of market reactions – they missed and gapped down in Q1 but quickly recovered to new all-time highs. The report from last week confirmed the bullish sentiment and the stock gapped even higher, where it faded. Such big earnings gaps in heavy stocks are often used as liquidity events by institutions that want to ring the register. 

The one clear trend this earnings season is the massive capital spending by major tech companies. This is extremely bullish for companies that help to build AI infrastructure – NVDA, AMD, MU, SMCI, DELL, MSFT, GOOGL, AMZN, etc. The question is how much of that has already been priced in by the market? If the market is in a sour mood, we can still see the stocks of companies that report strong earnings pull back due to P/E multiple compression and vice versa. 

In the meantime, restaurant earnings have been on fire. CMG broke out to new all-time highs lifting many others in the space – WING, CAVA, SHAK, TXRH, etc. WING reports earnings next week.