Traders,

The first critical test of the market rebound has arrived. Just as the S&P 500 reached the declining 50-day moving average, two tech juggernauts have come out with underwhelming earnings. Microsoft and Alphabet are down over 6% in after-hours trading, and the major indexes are gapping lower Wednesday morning.

Google parent, Alphabet, missed expectations on the top and bottom line while revealing a drop in YouTube ad revenue. Meanwhile, Microsoft reported weaker-than-expected cloud revenue despite besting sales and earnings forecasts.

How investors respond to the weak open will be telling. Will this spark a deep retracement that thwarts the recovery? Or will buyers look past the earnings disappointment and focus on the bullish tailwinds of seasonality, a weakening dollar, and yields losing steam?

Last Friday marks the pivot low ($363.54 on SPY) that must hold for the daily uptrend to remain intact. That’s the level to watch in the days ahead if the overnight pullback persists.

Video Of The Day: Queen’s Court – Covered Call Analysis on $DFS

On today’s Queen’s Court, coaches Emily and Matt analyze a Covered Call on $DFS (Discover Financial Services).

Chart of the Day: S&P 500 ($SPY)

A pullback is acceptable. A trend change is not. To prevent the latter, SPY must stay above $363.54.

Today’s line up

Traders Lounge 11 AM EST

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The Coaches Show Replay

If you missed last night’s episode where Coach Tyler Craig discussed Bottoming Patterns or would like to watch it again, check it out here.

Halftime Report 12:30 PM EST

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Trading Justice 499: Sub Prime Lessons

In this episode, Mark and Matt take a deep look at the Financial Crisis of 2008.

Listen to this episode in the player below.

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