What’s Inside:
- Facebook blows away earnings estimates
- The Nasdaq 100 bounces strongly from targeted support in the 4382/73 vicinity
- Overnight turns markets lower following surprise by BoJ
At last, some good news on the earnings front from one of the Nasdaq 100’s biggest and most popular constituents. After the closing bell yesterday Facebook (FB) reported a Q1 profit of 77 cents per share on $5.38 billion in revenue. These results blew away Wall St.’s expectations for an EPS of only 62 cents on revenues of $5.26 billion, according to Thomson Reuters. Facebook’s stock responded with a vengeance, ripping higher by about 9% following the release, pushing the Nasdaq 100 futures up over 20 handles after the 4 pm EST cash close.
The Nasdaq 100 (FXCM: NAS100) has been hit hard recently by sub-optimal earnings reports from some of its biggest companies. The index was initially sent down towards support in the 4433/50 vicinity last Friday in the wake of weak earnings reports from Alphabet/Google and Microsoft, which held until Apple reported its quarterly results heading into yesterday’s session. Apple added selling forced the Nasdaq to snap cited support, opening up the door to our next targeted support zone of 4382/73.
NAS100 Daily
A late-day bounce developed from right-smack-in-the-middle of support after the FOMC announcement (more details on the outcome here) and momentum furthered with the help of Facebook in afterhours. The sharp bounce pushed the Nasdaq 100 up into the 4433/50 vicinity. As we noted in yesterday’s piece; former support will act as resistance until otherwise indicated. In the same area as horizontal resistance lies, an upper parallel (most visible on the 1-hr) further cements the importance surrounding 4433/50.
NAS100 Hourly
Overnight, the Bank of Japan caught markets by surprise. Kuroda and crew did not make any adjustments to their current monetary policy after reports last week that further rate cuts were likely on the way. This caused the Nikkei 225 to drop 3.7%, while ripping the Yen nearly 3%. The impact is being felt globally, but don't be surprised if the jet lower in markets outside of Asia quickly erase losses. The trend, especially in the US, has been for 'bad' news (this isn't really bad news) to get shunned, while good news is bought aggressively. If that changes, we will take note as it will act as a sign of change in bullish market character.
Getting back to the Nasdaq 100. The gains in the futures following the release of Facebook earnings have been more than erased, which could bring the support zone between 4382/73 back into play. The ping pong action between key support and resistance will end with a resolution one way or another. The strategy on this end is to look to play ‘between-the-lines’; long on successful holds of support, short on failures to move above resistance. Once a break of either side takes shape we will look for signs the move will continue in that direction and go from there.
Looking for longer-term outlooks? Check out our quarterly forecasts.
---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at instructor@dailyfx.com with any questions, comments, or concerns.
