The SPY Weathers The Biggest Earnings Of The Season: Here's What's On The Horizon

Zinger Key Points
  • Dip buyers in Apple, Tesla and Microsoft propped the SPY up after gapping down to open Friday's session.
  • The market ETF was consolidating on lower-than-average volume, indicating continuation higher may come next week.

The SPDR S&P 500 SPY gapped down 1.25% on Friday after a big bullish day on Thursday saw the market ETF rally 1.46% from the previous day’s closing price.

Thursday hosted the most anticipated after-hours earnings session of the season, with mega-tech companies Apple, Alphabet and Amazon reporting. Other big names that printed financials included Starbucks, Qualcomm, Ford, Gilead and MicroStrategy.

With the biggest names in focus, the SPY was pressured lower by Apple and Alphabet missing analyst estimates on both the top and bottom line, while Amazon reported mixed results, posting a massive EPS miss but beating the consensus estimate for revenues.

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Ford, MicroStrategy and Starbucks also missed EPS consensus estimates but printed revenue beats. Qualcomm beat EPS estimates but missed on revenue estimates and Gilead beat analyst estimates by a landslide.

Many big tech stocks were negatively affected by Apple, Alphabet and Amazon’s results, including Tesla and Microsoft, which opened about 3% and 2% lower, respectively.

Dip buyers came in to buy Apple, Alphabet, Tesla, Microsoft and Amazon, to a lesser extent, when the market opened on Friday, however, which lifted the SPY up to near flat, saving the market from forming a bull trap and instead, causing a golden cross to occur on the SPY.

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The SPY Chart: On Jan. 23, the SPY crossed above the 200-day simple moving average (SMA), which was the first indication the bear market could possibly be coming to an end. On Jan. 26, the market ETF burst up through a long-term descending trendline that had been holding the SPY down since Jan. 4, 2022, which gave bullish traders more confidence.

  • Although the SPY hasn’t confirmed the end of the bear market by rising up 20% from the Oct. 13 low of $348.11, the market ETF is trading just under area in consolidation for a possible break above the level. For the bear market to officially end, the SPY needs to reach above $418, although conservative traders will want to see the ETF break resistance at $420.
  • On Friday, the SPY was trading mostly flat on lower-than-average volume, which indicates consolidation is taking place. The consolidation is needed because the SPY’s relative strength index (RSI) was measuring in just below 70% on Thursday. When a stock or ETF’s RSI reaches or exceeds that level it becomes overbought, which can be a sell signal for technical traders.
  • If the SPY closes Friday’s session near the high-of-day, it will print a bullish Marubozu candlestick, which could indicate higher prices are in the cards for Monday. If that happens, traders will want to see the ETF break above Thursday’s high-of-day in short order.
  • If the SPY closes the trading session with a significant upper wick, the ETF will print a shooting star candlestick, which could indicate lower prices or continued consolidation is in the cards. There’s a possibility the SPY could settle into a bull flag pattern over the next few days before trending higher.
  • Bearish traders will need to wait for signs that the current setup is a bull trap. If the SPY were to fall under $400, the uptrend would be negated and a downtrend could occur. For now, the most likely scenario is consolidation followed by continuation higher.
  • The SPY has resistance above at $420.76 and $426.56 and support below at $414.89 and $408.
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