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Is the Bear Market Already Over?

Tech stocks are inching toward an important breakout zone.

The Nasdaq Composite eked out a small gain yesterday. Without much fanfare, Wednesday marked its fourth straight day of gains and a new 2019 closing high. Its next big test will come soon enough as the tech-heavy index approaches a confluence of resistance marked by its 200-day moving average and November-December highs:

COMPQ

Just two months ago to the day, the Nasdaq was beginning to undercut its lows to officially kick off the final phase of the fourth-quarter meltdown. By the time the dust cleared, it had officially entered bear market territory — a drop of 20% from its highs.

The Nasdaq is now just a few points from officially “exiting” bear market territory, marked by a rally of 20% from its lows.

Should this even occur this week, we’re looking at the Nasdaq’s longest bear market run (entry to exit) since the 2018-day bear market triggered by the financial crisis in 2008, MarketWatch reports. The Nasdaq has taken its sweet time digging out of its rut. The current bear run from its lows 36 trading days ago would be the longest period since a 69-day stretch that ended in January 1991, MarketWatch notes.

NASDAQ

Can tech stocks power higher and leave this bear market in the dust? We’ll need to pay close attention to how the Nasdaq behaves as it gears up to test resistance over the next several sessions.

Speaking of tech stocks, Twitter Inc. (NYSE:TWTR) is finally catching a break after releasing mixed earnings last week.

Twitter beat estimates last week. But the stock took a huge hit after the company admitted it probably wouldn’t make as much money this year as analyst originally expected. Twitter’s user base also appears to be stagnating, prompting management to announce it will no longer report monthly average users. That news alone was enough incentive for traders to slam the stock by nearly 10%.

TWTR

Luckily, some good news is scaring away the bears — at least for now. Twitter stock jumped more than 3% yesterday after Morgan Stanley revealed a 5.6% stake in the company, according to Business Insider.

It looks as if the smart money hasn’t given up on this stock just yet. Still, shares remain well below their pre-earnings highs. The bulls have a lot more work to do to set this stock up for a viable short-term trading opportunity.

While Twitter tries to get back on its feet, one of its more desperate rivals is staging a ferocious comeback.

Snap Inc. (NYSE:SNAP) shares spent most of 2018 finding new lows. But surprisingly strong earnings have prompted some analysts to upgrade the stock.

Unlike Twitter, Snapchat is actually retaining users. In fact, its daily active user count stabilized during the fourth quarter. That metric alone was enough to help juice shares by more than 20% in a single trading day. SNAP is now up an incredible 65% year-to-date.

But don’t get too excited. If you bought shares in September, you’d still be in the red.

SNAP

I’m not certain that one decent quarter will be enough to pull SNAP out of its tailspin.

Even a post-scandal Facebook Inc. (NASDAQ: FB) is a thorn in Snapchat’s side. CEO Mark Zuckerberg’s willingness to poach ideas from competitors and implement them on Facebook’s massive platforms is a cutthroat tactic — but it works every time.

Take Snap’s Stories feature. Facebook simply took the idea and added it to its Instagram platform. With the help of Stories, Instagram helped drive Facebook ad revenue to almost $17 billion during the fourth quarter.

Bottom line: Snap will need to innovate — and continue to hang onto its user base — to stay relevant and fend off Facebook attacks.

Finally, futures are flashing green this morning.

Stocks are looking to post a strong start right out of the gate this morning as fresh earnings reports hit the wire.

I’ll be looking to see if the averages can hang onto these gains throughout the day to set us up a strong push into the weekend.

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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