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No Break Yet in The Positive Price Momentum

Posted October 26, 2021 at 9:55 am
Patrick J. O’Hare

Just because some technical indicators might suggest the stock market is overbought on a short-term basis and ripe for a pullback doesn’t mean market participants will necessarily comply with that setup. They certainly aren’t in pre-market action anyway.

Entering today, the S&P 500 is up 6.0% for the month, but the futures market is lined up in a way that indicates more gains are coming.

Currently, the S&P 500 futures are up 17 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 83 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are up 106 points and are trading 0.6% above fair value.

Facebook (FB) is garnering some credit for the positive tone. The reason being is that its stock has held in so far after the company’s earnings report, which wasn’t indisputably good, but, importantly for investors, was better than feared. Facebook also helped its stock’s cause with news of a $50 billion increase to its share repurchase authorization.

Shares of FB are up 0.4% in pre-market trading, but had been up more than 3.0%.

In general, the earnings news is being touted as a supportive influence, primarily because most companies continue to talk of robust demand that is enabling them to pass through price increases that are helping to mitigate the impact of higher costs on profit margins.

UPS (UPS) is a luminary today. It is up 4.1% after topping third quarter EPS and revenue estimates, and raising its FY21 consolidated adjusted operating margin to approximately 13.0%. Some other stocks reacting well after their earnings results include Eli Lilly (LLY)Hasbro (HAS)GE (GE)Sherwin-Williams (SHW), and JetBlue (JBLU).

Dow component 3M (MMM) is down 0.4%. It topped the Q3 consensus EPS estimate by a comfortable margin, but narrowed its FY21 EPS guidance range to $9.70-9.90 from $9.70-10.10 while boosting the low end of its FY21 revenue growth outlook, saying it now sees growth of 9-10% versus prior guidance of 7-10%.

Now, the wait is on for reports after today’s close from Microsoft (MSFT)Alphabet (GOOG)Advanced Micro Devices (AMD)Visa (V)Texas Instruments (TXN), and Twitter (TWTR).

The stock market seems more than content to wait, placated by the positive price momentum that has yet to break, some residual relief that the corporate tax rate isn’t going to be increased to pay for the Democrats’ social spending package, a 10-yr note yield sticking below 1.70%, and the stirrings of animal spirits that can be seen again across the SPAC universe.

The latter has invited a recognition that liquidity is still flowing freely and that there is a lively retail impulse being influenced by an increased load of available cash at what is typically a seasonally strong time of year for the stock market.

Originally Posted on October 26, 2021 – No Break Yet in The Positive Price Momentum

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