Summary:

• US stocks rose on Tuesday after strong recent declines
• US500 has now recovered around half of the drop
• Earnings season in full swing but on the back burner for now

Tuesday’s session marked a decent comeback for US stock as the pandemonium from the start of the week subsided and indices looked to recover some of the declines. The US500 enjoyed a fairly strong bid from the lows of 2530 and gained an incredible 160+ points from this level into the close. Let’s now look at the charts and try to identify a few things to keep an eye on going forward. 

First off the bounce seen in the last 36 hours has been fairly significant with the market recouping around half of the ground lost from last week’s all time high. A fib retracement taken from the high of 2880 to the low of 2530 gives some good context with the 50% level at 2705 currently close to the recent swing high. The 38.2% at 2664 had been providing some resistance but a strong move above there into the cash close could now see this area flip and provide some support. 

 The US500 has recovered almost 50% of the declines in what was a strong bounce from the lows. Source: xStation

From a longer term perspective the area where the drop found buyers on Tuesday’s plummeting decline is an important level to consider going forward. As long as price remains above here then the sell-off has been halted and a further recovery may occur. The 200 day SMA is presently at 2539 and this is within 10 points of the low at 2530. Looking back the market has been above the 200 day SMA since the US election, when in similar price action the market fell below the indicator but printed a bullish hammer. Back in November 2016 this obviously marked the next leg higher in the rally and whilst it would be very ambitious to target similar gains now, it does at least suggest that the uptrend remains intact as long as the low holds. 

 The US500 printed a daily hammer to stay above the 200 day SMA on Tuesday – a similar pattern to that seen the day after the US election in November 2016. Source: xStation

It has almost been forgotten in the wake of the turbulent moves in the wider indices that US earnings season has been in full swing for a while now with some notable companies reporting overnight. One of the most attention grabbing was SNAP (SNAP.US on xStation), the parent company of Snapchat that blew everyone away with explosive revenue growth in Q4. The key stats from the trading update are as follows:

• Revenue: $285.7M, up 72% year-over-year and well above the $252.8M expected
• Daily Average Users: 187M, up 5% from prior quarter
• EPS/Net loss (adjusted): -$0.13 vs -$0.16 expected

All in all there were plenty of positives here with a strong increase in daily average users supporting the revenue growth and also the net loss per share being smaller than expected. 

 SNAP is called to open sharply higher this afternoon after the latest trading update. Source: xStation

The stock soared some 30% in the after hours trade and is set to open this afternoon around the 22 level – its highest price since May of last year. After an overhyped IPO the stock has been in a near constant state of decline but the latest figures could mark a turning point and investors will certainly be feeling a lot happier after the latest trading update.