Market On Open - Thursday 25 April

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Earnings Don’t Drive Stock Prices, Episode 706 of Season 7

by Alex King

In the last two days, Tesla printed terrible numbers and the stock jumped 15%, and Meta printed great numbers and the stock dived 17%. Yet another example of why it’s not earnings that determine stock prices, it is the supply and demand of the stock itself. TSLA was heavily shorted into earnings, setting the name up for a short-covering rally almost regardless of the print; META had recently put in a huge only-up move from the October 2022 lows, meaning that plenty of people had plenty of profits to take as soon as any cracks appeared in the facade. (If you missed it, you can read our Meta earnings review, here).

One of the reasons I like to invest in and trade index, volatility and commodity ETFs is that there is no pretense that anything like the real world has any influence on their prices. The S&P may rise when bonds rise, or it may fall when bonds rise, or vice versa. The Nasdaq may rise regardless of whether Tesla prints a big miss. Oil prices may go up, or down, when there is tension in the Middle East. All of this means that in some ways the analysis and the trading is easier, for all you need study is price itself. The single best determinant of price tomorrow is price yesterday and all the time before that.

For now, let’s get into the detail on the market charts. Below we walk through our daily take on all four major US equity indices, plus treasury bonds, oil, volatility (via the Vix) and sector ETFs.

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Short- And Medium-Term Market Analysis