It’s all about expectations, and when those expectations are lofty, coming up short means serious carnage.  This is true not just of earnings season but specific metrics in various industries and companies.

Netflix (NFLX) actually beat Wall Street consensus posting earnings of $0.60 and margins improved in all three business segments from a year ago.

• US Streaming 37.1% from 35.5%
• International Streaming 16.3% from 11.6%
• Domestic DVD 60.2% from 57.0%

But when it comes to Netflix, it’s all about subscriber growth, which missed by a mile as the US saw a decline of 126,000.  This isn’t the first time Netflix missed subscriber forecast, but it’s by far the largest disparity between forecast and actual results.

I think it’s too early to write off the company, but I am happy we sent out an alert taking profits in the Swing model portfolio last week.  There are several lessons here, including the fact only traders with high pain tolerance should consider buying on weakness once the dust settles.

I think the stock will stage a rebound at some point.

There has been downside pressure all day, but buyers have been nibbling, including after news Senators Marco Rubio and John Cornyn have introduced legislation to keep Huawei restrictions in place.   I don’t think this will hurt trade talks, and in fact, it might help.

Our negotiating team will be on a call with their counterparts later today and more than likely head out to China very soon.

The rally has stalled, but panic has been held in check, and that’s good news.