I am noticing a lot of stocks are selling off on good earnings and guidance. MSFT was an exception yesterday but many other stocks are selling off and even if they finish up for the day, they are closing near the lows of the day. Could the street think these are peak earnings despite raised guidance?
There is some tendency for stocks to go up in anticipation of good earnings and then sell off on the actual announcement. Nevertheless the answer to your question, IMO, is, yes. But that does not mean the market will necessarily soon experience a correction. Remember inflation lifts nominal earnings and stock prices just as it lifts other prices. People are anticipating a cooling off of inflation in 2022. The broad market is heavily margined right now and peak markets, peak earnings*, and peak market credit seem correlated though not coincident. Which leads, and which lags, I am not sure. Once buyers are leveraged to the hilt the momentum behind still higher prices should wane. The Broad Market doesn't go up and then down. There is almost always a transition period, that can be quite drawn out. when there is increased uncertainty. It will be hard, despite being leveraged to new heights, for the market to fall so long as strong demand accompanies inflation. In fact demand is necessary for inflation to exist. Barring strong counter forces, equity markets seem always wanting to explore new limits of irrationality. What I do, is monitor the S&P as an indicator of peaking broad market prices, monitor earnings for signs they are leveling out, and monitor leverage being employed for indication that market participants are running scared of leveraging further or are de-leveraging. Of course I am writing here of what happens in aggregate, and not with regard to any particular stock. __________________ *Stanley Druckenmiller said he never saw a bear market that wasn't preceded by peak earnings. So that tells us that if earnings are still rising, we should not expect other than minor corrections. As a matter of fact, peak stock prices often precede peak earnings. And I suppose this is evidence of an anticipation of peak earnings, which goes to your question...but if it is, it does not necessarily mean the anticipation will turn out to have been correct.
traders don't attempt to rationalize. It might already be priced in, or it will be priced in later. Just focus on the chart and just trade based on it.
%% Good points; took some profits on SPXL.But even FB found support @ 50dma. QQQ, TQQQ,qld, UPRO = still strong. Mr Trumps FB substitute \may crush FB, but may take time.......................................................................
My automation hedged long term stocks and went short on Indexes/Hedged near all time highs. My Trading Plan is like fishing in an inlet that has hundreds of 12 inch halibut and one 500lb tuna, just a matter of time...