Stocks Pop, But Then Came Netflix
2022.04.20 08:56
The S&P 500 rose by 1.6%. I couldn’t tell you what the catalyst was, but that is what happened. The only thing that made sense was that the turn was expected to happen given the options cycle playing out, which I mentioned over the weekend.
Typically, we can rally for a few days or consolidation sideways following OPEX. Still, we have a lot of events coming up over the next two weeks that should require investors to look to buy puts, specifically ahead of the FOMC meeting on May 4.
Invesco QQQ Daily Chart
S&P 500
On top of that, the S&P 500 rose to around 4,470 and found some stiff resistance. That resistance happened to be on the Fib grid. This resistance region is on the same trend line that acted as resistance/support at the end of January, the end of February, the beginning of March, and now.
So if we stop here, it makes total sense.
S&P 500 1-Hr Chart
Anyway, the pattern in the S&P 500 is very unstable, and in fact, I think the algos are on repeat mode, as the chart shows below.
If so, this whole rally should vanish with a push back down to 4,380 over the next day or so.
S&P 500 Futures Chart
Real Yields
The 10-Yr TIP hit 0% Tuesday, and it probably has to go much higher than that. On Thursday, there will be a 5-yr TIP auction, which will help to push these rates even higher.
10-Yr TIP Price Chart
TIP ETF
Meanwhile, the iShares TIPS Bond ETF (NYSE:TIP) fell to $120.53 yesterday and the lowest level since June 2020. I don’t see why this ETF can’t drop to $117.
What was even stranger was that the TIP ETF was down sharply, and the Invesco QQQ Trust (NASDAQ:QQQ) was up sharply.
Someone was way off base here today, and my guess is it wasn’t the bond market.
TIP ETF Daily Chart
Netflix
The market was trading much lower after hours following Netflix’ (NASDAQ:NFLX) horrible results. At this point, we can say the growth story is over.
The company reported a new loss of 200k subscribers during the first quarter; estimates were for gains of 2.5 million. Meanwhile, the guidance was worse, guiding for a loss of 2 million subscribers in the second quarter versus forecasts for an increase of 2.4 million.
It just doesn’t look good at this point; subscribers seemed to be rejecting the recent price hikes. The stock was trading down 25% post-earnings.
Last week, I noted that the stock looked weak and that the second quarter was typically their worse quarter. But these results and guidance even exceeded my bearish expectations.
The stock was trading at technical support at $260, and it seemed highly likely this stock was going to fill the gap from January 2018 at $227. All gaps get filled, I guess.
Netflix Daily Chart
Disney
Walt Disney Company (NYSE:DIS) was trading lower in symphony with Netflix, as it should. It probably has further to fall as the stock was falling below support at $127, which I mentioned on Monday, and should now be on its way to $117.
Disney Daily Chart
