An Extended Tape Meets a Vulnerable Market
With stocks sitting at record highs, there is significant news flow this week with not much room for error. Here's the play.
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The indexes closed last week at fresh record highs, with the S&P 500 (SPY) and Nasdaq Composite logging their sixth straight weekly gain. April was the best month for the S&P 500 and Nasdaq since 2020, and the Dow had its best month since November 2024.
Futures dropped sharply a few hours before the open as Iran claims it has hit a U.S. ship. There is no confirmation of that yet, but the market is vulnerable to any negative news at this point since the indexes need a rest.
The market handled the Magnificent Seven reports quite well and rendered the "sell-the-news" technical setup harmless. However, with eight up weeks out of the last nine, mega-cap leadership doing most of the heavy lifting, and choppy and uneven breadth, the setup favors rotational action rather than another leg straight up.
Investor's Business Daily continues to recommend long exposure of 80% to 100%, but with the S&P 500 more than 6% above its 50-day line and the Nasdaq nearly 10% above it, the risks of a pullback are rising. Still, we are in the early stages of a "power trend," which means the market tends to stay sticky to the upside and tends to attract strong dip buying. In this environment, winners need to be given some room to run.
This is a market for stock pickers. It is not the kind of tape that rewards chasing the names that already ran.
A Big Earnings Week
About 63% of the S&P 500 have now reported earnings, with a strong beat rate, but this week brings another wave of names that matter for sector leadership.
Palantir Technologies (PLTR) reports after the close tonight. The stock is priced for perfection, and even a small disappointment on the AIP commercial growth line could trigger a sharp move. Advanced Micro Devices (AMD) reports Tuesday after the close, and Wall Street will be focused on MI300X traction and TSMC capacity allocation. Pfizer (PFE) reports Tuesday morning.
Wednesday brings The Walt Disney Company (DIS) , Uber Technologies (UBER) , DoorDash (DASH) , and Marriott International (MAR) , among others.
Thursday is heavy with The Trade Desk (TTD) , Coinbase Global (COIN) , Airbnb (ABNB) , McDonald's (MCD) , and Datadog (DDOG) . Friday closes the week with the April nonfarm payrolls report.
Small-caps have been showing better relative strength, but small-cap earnings season is just getting going, and that group is far less predictable than the big names. Position sizing matters more there than usual.
I have a dozen or so names reporting coming up in the next week and will be busy navigating the action from the likes of Xeris Biopharma (XERS) and Hims & Hers Health (HIMS) .
Project Freedom and the Oil Narrative
The geopolitical headline this morning is Project Freedom. President Trump announced Sunday that the U.S. will begin escorting commercial vessels out of the Strait of Hormuz starting today. CENTCOM has roughly 15,000 service members, guided-missile destroyers, and more than 100 aircraft attached to the operation, and the U.S. naval blockade of Iranian ports remains in place. Iran's parliamentary national security commission has called the move a violation of the ceasefire and is taking an aggressive stance.
Oil pulled back modestly last week but spiked sharply higher on news of a potential attack on Monday morning.
Friday's ISM Manufacturing prices index hit 84.6, the highest since April 2022, and the employment sub-index dropped further into contraction at 46.4. The macro tape is still telling us the same story: inflation is bubbly, activity softer, and the Fed boxed in.
AI strength is offsetting any and all economic worries at this point, but oil is the main driver of inflation worries and is heading in the wrong direction.
My Game Plan
The plan into a heavy earnings week with the indexes extended is to stay patient and let the tape come to us. Mega-caps that already moved on earnings are likely to churn, and a number of stocks are setting up well after rotating up off lower bases on Thursday and Friday. If you are so inclined, the better setups are in names that are not technically extended and are showing relative strength on the rotation, rather than the leaders that ran straight up last week.
It is important to be aware of earnings dates. Smaller stocks hold substantial risk on earnings reports, and negative surprises are much more common with the little guys.
The bigger question for the longer term, longer than a few days, is whether forward earnings estimates start to come down. That is the biggest long-term market risk. It is not happening right away, but if that changes, it will be time to be much more cautious. For now, ignore the inclination to try to call a market top.
Related: 5% on the 30‑Year Bond Is Huge, But Is It Really 'The Line in the Sand'?
At the time of publication, Rev Shark was long GOOGL, XERS, and HIMS.
