Happy New Year everyone!
I hope you’ve had a lovely holiday season with your friends and family, and that the market hasn’t given you too much trouble. I mean it’s officially the first “trading day of the year”…
And it’s already been crazy volatile.
But I’ve been awaiting Q4 earnings season, as I think it could be one of the only catalysts to break the bear market.
But, so far…
The only signs I’ve seen are that this bear market will get much worse before it gets better.
The beginning of this downfall coincided with Q3 earnings, and was exacerbated by key stocks like the FAANGs reporting lowered guidance during their quarterly reports.
What does lowered guidance mean?
It means growth is slowing down.
While one can argue the economy is still strong, it IS slowing and earnings is one way we’re seeing this. It wouldn’t matter as much if investors waved this slowage aside. Analysts and traders could’ve easily pointed out that slowing guidance isn’t that big of a deal after periods of so much growth.
However, that isn’t what happened.
Strong stocks like COST even got hit. I call that the Q3 earnings Kiss of Death (if you’ve been with me awhile, you’ve heard me reference this before in relation to FAANG). It’s like when you’re in school and your parents punish you for a B+.
Expectations are high and anything less than perfect isn’t enough.
This tailspin sent us into bear market territory. FAANG stocks lead the market higher, and during earnings season, they entered bear market territory before the indexes.
For reference: FAANG is Facebook, Apple, Amazon, Netflix and Google. A clever acronym, I know.
FAANG lead the market to bear territory, and only when it shows signs of life, is it possible we can climb back out.
Why?
By market share alone, plus the percentage impact they have on indexes, their moves matter greatly to the overall health of the market.
That brings us to today.
After very weak trading the last few months, AAPL lowered guidance ahead of Q4 earnings, sending the stock plummeting 8% after-hours.
Is it justified? Maybe.
Yes, they’re slowing iPhone sales and now AAPL doesn’t even want to report numbers. But here, price is king. What matters is the value the market places on AAPL — which lowers almost every day. Even on days where the market rallies, AAPL can barely catch or hold a bid. It’s been dethroned by MSFT as a tech king and market leader, but it still matters in terms of market movement.
The average person still thinks AAPL when they think tech.
The critical fact here is that investors aren’t giving second chances.
Any signs of slowing, and the stock is getting sold. If this continues in FAANG and the broader market, the lows we saw in December will be the point traders WISH they sold. The market cannot trade higher without its strongest team players performing.
There’s just no way, so I’m planning accordingly.
If you want to have some extra insight into how I’m planning, join me in the Options Chatroom HERE. I’m in there 5 days a week giving additional market insight and live trading.
