Major Moves

Twitter, Inc. (TWTR) kept alive its streak of alternating between good and bad earnings announcements this quarter when it announced better-than-expected numbers this morning before the opening bell. The company beat revenue expectations by $11.84 million and earnings expectations by $0.22 per share – reporting numbers of $787 million and $0.37 per share, respectively.

This news, coupled with surprisingly strong daily active user (DAU) and monthly active user (MAU) numbers, sent the stock soaring higher. Analysts had expected DAUs to come in at 128.4 million and MAUs to come in at 318.8 million, but Twitter announced DAUs of 134 million and MAUs of 330 million.

Twitter was the top-performing stock in the S&P 500 today with a gain of 15.64%. With today's breakout, Twitter not only completed a long-term diamond reversal pattern but also broke into the bearish gap the stock formed on July 27, 2018, after a particularly disappointing earnings announcement.

Better yet, Twitter was able to hold onto most of its intra-day gains. Had we seen the stock rise higher in early trading only to give up those gains and drop back down by the closing bell, we would have known that traders weren't confident in the future strength of the stock and had decided to take profits off the table instead. However, we saw traders pushing the stock higher most of the day – indicating that there is still plenty of buying pressure left to potentially fill the gap that formed last summer.

This is exactly the kind of strength the market will need if the S&P 500 is going to have a chance of breaking up to new all-time highs in the coming weeks.

Performance of Twitter, Inc. (TWTR)

Nasdaq Composite and S&P 500

The Nasdaq Composite closed at an all-time high today of 8,120.8 as large technology firms like QUALCOMM Incorporated (QCOM) continued to ramp higher.

The S&P 500 also came close to establishing a new all-time high today, missing by only 4.6 points. However, the broad market index did manage to close at its second highest level ever at 2,933.68. Only the closing value of 2,934.80 on Sept. 20, 2018, has been higher.

Today's bullish move was driven by stocks from a variety of sectors. Here's a list of the top five performers:

  • Twitter, Inc. – technology sector – up 15.64%
  • Hasbro, Inc. (HAS) – consumer goods sector – up 14.23%
  • Kohl's Corporation (KSS) – services sector – up 11.91%
  • Quest Diagnostics Incorporated (DGX) – health care sector – up 9.27%
  • Celanese Corporation (CE) – basic materials sector – up 7.37%

Seeing gains across a wide variety of sectors tells us that today's move higher wasn't just a bullish fluke driven by a few large companies. In fact, none of the top five performers has a market cap greater than $30 billion. Now we just have to wait and see if the S&P 500 can do the same thing tomorrow.

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Performance of the S&P 500 Index

Risk Indicators – Trading Volume

Looking at the current bullish performance of the U.S. stock market, you might be tempted to assume that Wall Street is happy and content, without a worry in the world. Fight that temptation.

No matter how well things are going, good traders can always find something to worry about. That's what makes them good traders. They look for the potential dangers, but they don't overreact to them until they turn from potential dangers to imminent dangers.

So what is Wall Street worried about now? Low trading volume. The market experienced its lowest level of trading volume for 2019 yesterday with only 5,903,570,396 shares traded. While this may seem like a large number, it is 11% lower than the April month-to-date average of 6,617,461,763 shares traded and a full 46% lower than the 10,923,533,197 shares traded on March 15 – the highest daily amount so far for 2019.

Low volume is concerning for traders during uptrends because it makes them wonder if there is as much bullish support as it appears. When trading volume is high during an uptrend, it tells you that everyone has bought into the bullish narrative and is likely going to continue buying. Conversely, when trading volume is low during an uptrend, it leaves open the possibility that some traders haven't bought into the bullishness and are either sitting on their cash or putting it into other more conservative investments and that more traders could do the same.

As you can see in the chart below, daily volume has been trending lower for the past month as the S&P 500 has been climbing. This is particularly worrisome for those who believe that many traders are going to start selling their shares and taking profits off the table once the S&P 500 climbs back to its all-time high of 2,940.91.

I think it's still too early to fret over lower trading volume at the moment, but I will be watching to see what happens when the S&P 500 hits resistance. If resistance holds and trading volume picks up, it may be time to protect some profits.

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Daily shares traded

Bottom Line – New Highs in Sight

Even with the lower-than-average trading volume, the S&P 500's all-time high from Sept. 21, 2018, is getting closer and closer. In my experience, the market doesn't get this close without trying to take out the high. Watch for an attempted breakout soon.

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