Stock Market: Big Resistance Zone in Sight

By Greg Guenthner Apr 26, 2016, 9:48 AM 

Earnings season is here. And that’s not the only reason the bears are sharpening their claws…

Several key market forces are converging to make for a very eventful week. The market’s ready to throw a wrench in investors’ gears. And you’ll need to keep your head on a swivel if you want to survive…

The stock market has enjoyed a miraculous comeback from February’s brink of destruction. But the smart money is skeptical as we stumble into earnings season. Most of the money managers who responded to Barron’s just-released “Big Money” poll are expecting another 10% correction over the next year. Less than 40% are bullish on stocks in the coming months…

“The current reading is perhaps one of the least bullish in the poll’s more than 20-year history, a reflection of the market’s lofty valuation,” Barron’s explains. “Instead of a rousing encore for the bull, most managers see only a modest rise in stock prices in the year ahead, possibly punctuated by a dramatic, if temporary, setback.”

Big Money’s main concern? Earnings. Rather, lack of earnings…

As we dive headfirst into earnings season this week, we’re going to get a firsthand look at whether these concerns are valid. Some of the most recognizable names in the world are reporting (or have already reported).

Apple. Google. Facebook. Microsoft.

We’re talking the cream of the crop… The kind of stocks that even a cutthroat broker would buy for his grandma’s account.

But despite their prestige, none of them can hide from the horrors of earnings season. And so far these popular tech names have failed to impress investors…

Google’s parent company Alphabet (GOOGL) missed analyst estimates for earnings and revenue for the first quarter. That sent shares down 5% on the day.

Microsoft (MSFT) also took one on the chin. Despite meeting expectations investors headed for the exits, sending the stock down more than 7% on Friday. Meeting expectations just wasn’t enough to keep the stock afloat—especially since guidance wasn’t that rosy…

“Basically, revenue growth has slowed to a crawl, and investors are not impressed,” Business Insider reports. “The company also issued poor guidance for the next quarter and had to make a tax adjustment that hurt earnings.”

Facebook (FB) reports Wednesday. Apple (AAPL) reports today after the closing bell. But analysts are already clucking over Apple’s warning that iPhone sales were going to fall.

“Sales of the iPhone have accounted for two-thirds of Apple’s revenue, so the extent of the drop is crucial for the company,” Bloomberg reports.

The potential for negative earnings surprises isn’t the only monster under the market’s bed this week. We have a Fed meeting and rate decision coming on Wednesday. That alone is enough to make most market watchers crazy. But this Fed session comes in the heat of earnings season—just as the major averages are approaching their highs…

stock market

Naturally, stocks have been on pause for the past week or so. We have the earnings season freight train, the Fed, and a big resistance zone in sight. That’s an incredible amount of noise packed into one week.

Fortunately, we can tune out the insanity and remain focused on the strategies that produce consistent gains. Our only goals this week are to avoid any massive earnings meltdowns and maintain a laser focus on price action. The market’s reaction to the Wednesday rate decision (which will probably be a non-event) and the headline earnings numbers should give us important clues as to whether the major averages will aggressively attack new highs—or stall out and move lower.

Remember, most folks aren’t too keen on the market right now. Any positive surprises heading into the meat of the trading week could spark another rally.

Let’s listen to what the market has to say and react accordingly…

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