Earnings Bombs

AMZN and GOOG brought out the cherry bombs to the bull parade in after hours.  And Europe, as it has a tendency to do, exacerbated the selling and turned it into a panic.  The volatility has been through the roof this week.  Usually that is a sign of capitulation, and while yesterday's price action before the earnings announcement looked constructive, the investors are nervous and are selling first and asking questions later.  In the overnight session, the selling got emotional, and we are retesting those lows made near the Wednesday close. 

Based on past experience, usually these emotional gap downs get bought as soon as the US cash market opens.  Especially when it has come after several days of selling.  I expect there to be buying when the US regular cash session opens.  Long term, these negative earnings reactions to relatively benign earnings from AMZN and GOOG do tell you that the leadership is no longer outperforming, and that means the bull market is basically over.  But even if its a bear market now, I expect there to be an oversold bounce that lasts at least 2 weeks going into a positive seasonal period.