Investors took Wednesday's reported earnings from META (aka Facebook) on top of Tuesday's reports from Microsoft and Google (aka Alphabet) and ran out of reasons to be bearish. When you run out of sellers you get rallies. Reminder that JP Morgan said 95% of its investors believed stocks would fall this year. That's not what all sentiment surveys are saying, but it suggested there was plenty of cash available to see some buying, and FANG / MAGA is giving them a reason to buy. Now, we have to factor in Amazon's earnings which came out after the bell yesterday.
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Amazon reported earnings after the bell yesterday, and unlike Microsoft, Google, and Facebook, much of Amazon's business is consumer spending related and they were initially rallying strongly after the numbers hit the wire, giving the bears another gut punch.
It's one thing for behemoths like Microsoft or Google to make money, but we also got earnings yesterday from some smaller but notable companies like Intel, Snap, and Pinterest, all of which were down after hours. So again, the big stocks are performing well while the smaller companies may be struggling a little more in this higher interest rate environment. Intel actually posted its largest quarterly loss in the company's long history. Snap was down 20% after hours.
Of course these small companies don't mean as much to the indices and the S&P 500 and Nasdaq will likely jump on this most recent FAANG / MAGA stock's gain if they hold into the morning, but will the small caps tag along again today like they did yesterday?
As Larry Kudlow says, profits are the mother's milk of stocks, so this success from FAANG / MAGA, whatever acronym you use, makes it tough to argue with them. But what do the charts say?
The one year chart of Amazon, which was trading near 120 after hours, although it was backing off as I was finishing this up, shows that it had been lagging and this recent push higher is certainly improving the chart. That is, unless you pull back a little further and the picture gets a little more murky.
A push to 120 does have it testing the longer term resistance line, and it also tags the top of a large bear flag that started way back at a prior peak in late 2021. OK, so yes, the fundamentals look good, but can the technical picture improve from that nasty bear flag formation and resistance?
Google also has a bear flag problem. This remains in an ugly downtrend, but of course stocks don't go down every day or every week even in bear markets. But this one is still almost 30% off its 2021 highs and while it broke through some resistance, there is more descending resistance near 115. The bear flag from early 2022 eventually broke down, so it's just a matter of time before we find out if this current bear flag will suffer the same fate.
Meta / Facebook is also a long way from its all-time highs, but it has had a very strong run off the November low. There is a giant open gap from back in February of 2022 near 325 that will likely eventually get filled, but there's also a smaller one, although still very wide, down by 150. And of course the bottom of yesterday's gap down near 215 is also a potential. It did close above that blue resistance line so that was impressive and could mean the upper gap may be tested.
So the large cap stock indices, which are dominated by those big tech stocks, appear to be doing very well. We got a little pullback off the double top near 4200 on the S&P 500, and I see an inverted head and shoulders pattern which is generally a bullish pattern that often breaks out to the upside. As for the indicators, the PMO shows a negative divergence as it has made a pattern of lower highs while the S&P has been trending higher. That's a potential warning sign.
Now let's go to the small caps who have a different story, whether we are talking about the Russell 2000 or the S-fund's DWCPF.
The DWCPF (S-fund) tagged along for the large cap rally ride yesterday and perhaps it is looking to fill that gap just above 1640. I have been focused on that bear flag for so long and didn't notice the H&S, but our forum member quabit pointed out to me yesterday that large (blue) head and shoulders pattern on this chart. Good call quabit! Now, whether that neckline turns out to be another low that we test, or if it breaks down as they often do, either way at test in the mid-1550's is possible. Bouncing here to fill that gap could create the right shoulder of a smaller head and shoulder within the larger one. Why the small caps have a large head and shoulders while the S&P has a more bullish inverted head and shoulders pattern is a good question, as it is rare to see these move in completely opposite directions.
For giggles, the potential downside target of this large head and shoulders pattern if it broke down would be near about 1420. The smaller H&S in orange would be closer to 1520.
Comparing the two indices together, the S&P 500 and the DWCPF (red), we can see that they don't always go up or down in the same percentages, but they do usually move in the same direction. More recently that hasn't been the case with small caps lagging badly.
Right now it's the small caps that are lagging, but the question will be when will they catch up because this game has gone on for a long time where one takes the lead and then the other catches up. During most of 2021 small caps led most of the way until the shift started at the end of that year.
This morning we will get the Personal Income and Spending reports, plus the PCE Prices report, both of which are key Fed inflation indicators.
Next week we get Apple's earnings, the Fed's FOMC Meeting likely interest rate hike, and then the April jobs report on Friday.
One last time: If you like what you're seeing on TSP Talk, you could really help us out by telling a friend or co-worker. We don't do much advertising and even with server prices, email and text services, etc., going up all the time, and Google ad revenue suspiciously declining all the time, we've pretty much kept our Premium Services prices flat. Revshark has been with us for 17 years without a price change. TSP Talk Plus has remained the price same since inception. Intrepid did increase his prices one year but lowered them down this year after a 2022. To keep costs down we don't do a lot of advertising but we can increase revenue with volume. We can make that up with new readers, forum members, AutoTracker users, and subscribers, so we'd appreciate it if you let others know or link to us on social media, etc., or whatever the kids are doing these days. :^) Thanks!
I posted an S&P 500 chart above but this one is a longer term chart showing not only the negative divergence in the PMO indicator again, but that none of the previous PMO crosses below its moving average over the last few years came at market lows - although the one last June did come about a week before a low, but not until more damage was done during that week. We had a crossover earlier this week. Will it be different this time?
The EFA (I-fund) rallied over 1%, trying to keep up with the US rally. There's no denying that this is a bullish looking chart, but it also looks vulnerable to a profit taking pullback at some time in the near future.
Yields spiked higher for some reason yesterday. Q1 GDP wasn't awful but nothing great. And a rally in yields generally means selling in bonds, and the BND (Bonds / F-fund) chart is working on negotiating some of those open gaps in the area. I see this as a positive for the F-fund, but it may breathe in and out a little first.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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Amazon reported earnings after the bell yesterday, and unlike Microsoft, Google, and Facebook, much of Amazon's business is consumer spending related and they were initially rallying strongly after the numbers hit the wire, giving the bears another gut punch.
It's one thing for behemoths like Microsoft or Google to make money, but we also got earnings yesterday from some smaller but notable companies like Intel, Snap, and Pinterest, all of which were down after hours. So again, the big stocks are performing well while the smaller companies may be struggling a little more in this higher interest rate environment. Intel actually posted its largest quarterly loss in the company's long history. Snap was down 20% after hours.
Of course these small companies don't mean as much to the indices and the S&P 500 and Nasdaq will likely jump on this most recent FAANG / MAGA stock's gain if they hold into the morning, but will the small caps tag along again today like they did yesterday?
As Larry Kudlow says, profits are the mother's milk of stocks, so this success from FAANG / MAGA, whatever acronym you use, makes it tough to argue with them. But what do the charts say?
The one year chart of Amazon, which was trading near 120 after hours, although it was backing off as I was finishing this up, shows that it had been lagging and this recent push higher is certainly improving the chart. That is, unless you pull back a little further and the picture gets a little more murky.
A push to 120 does have it testing the longer term resistance line, and it also tags the top of a large bear flag that started way back at a prior peak in late 2021. OK, so yes, the fundamentals look good, but can the technical picture improve from that nasty bear flag formation and resistance?
Google also has a bear flag problem. This remains in an ugly downtrend, but of course stocks don't go down every day or every week even in bear markets. But this one is still almost 30% off its 2021 highs and while it broke through some resistance, there is more descending resistance near 115. The bear flag from early 2022 eventually broke down, so it's just a matter of time before we find out if this current bear flag will suffer the same fate.
Meta / Facebook is also a long way from its all-time highs, but it has had a very strong run off the November low. There is a giant open gap from back in February of 2022 near 325 that will likely eventually get filled, but there's also a smaller one, although still very wide, down by 150. And of course the bottom of yesterday's gap down near 215 is also a potential. It did close above that blue resistance line so that was impressive and could mean the upper gap may be tested.
So the large cap stock indices, which are dominated by those big tech stocks, appear to be doing very well. We got a little pullback off the double top near 4200 on the S&P 500, and I see an inverted head and shoulders pattern which is generally a bullish pattern that often breaks out to the upside. As for the indicators, the PMO shows a negative divergence as it has made a pattern of lower highs while the S&P has been trending higher. That's a potential warning sign.
Now let's go to the small caps who have a different story, whether we are talking about the Russell 2000 or the S-fund's DWCPF.
The DWCPF (S-fund) tagged along for the large cap rally ride yesterday and perhaps it is looking to fill that gap just above 1640. I have been focused on that bear flag for so long and didn't notice the H&S, but our forum member quabit pointed out to me yesterday that large (blue) head and shoulders pattern on this chart. Good call quabit! Now, whether that neckline turns out to be another low that we test, or if it breaks down as they often do, either way at test in the mid-1550's is possible. Bouncing here to fill that gap could create the right shoulder of a smaller head and shoulder within the larger one. Why the small caps have a large head and shoulders while the S&P has a more bullish inverted head and shoulders pattern is a good question, as it is rare to see these move in completely opposite directions.
For giggles, the potential downside target of this large head and shoulders pattern if it broke down would be near about 1420. The smaller H&S in orange would be closer to 1520.
Comparing the two indices together, the S&P 500 and the DWCPF (red), we can see that they don't always go up or down in the same percentages, but they do usually move in the same direction. More recently that hasn't been the case with small caps lagging badly.
Right now it's the small caps that are lagging, but the question will be when will they catch up because this game has gone on for a long time where one takes the lead and then the other catches up. During most of 2021 small caps led most of the way until the shift started at the end of that year.
This morning we will get the Personal Income and Spending reports, plus the PCE Prices report, both of which are key Fed inflation indicators.
Next week we get Apple's earnings, the Fed's FOMC Meeting likely interest rate hike, and then the April jobs report on Friday.
One last time: If you like what you're seeing on TSP Talk, you could really help us out by telling a friend or co-worker. We don't do much advertising and even with server prices, email and text services, etc., going up all the time, and Google ad revenue suspiciously declining all the time, we've pretty much kept our Premium Services prices flat. Revshark has been with us for 17 years without a price change. TSP Talk Plus has remained the price same since inception. Intrepid did increase his prices one year but lowered them down this year after a 2022. To keep costs down we don't do a lot of advertising but we can increase revenue with volume. We can make that up with new readers, forum members, AutoTracker users, and subscribers, so we'd appreciate it if you let others know or link to us on social media, etc., or whatever the kids are doing these days. :^) Thanks!
I posted an S&P 500 chart above but this one is a longer term chart showing not only the negative divergence in the PMO indicator again, but that none of the previous PMO crosses below its moving average over the last few years came at market lows - although the one last June did come about a week before a low, but not until more damage was done during that week. We had a crossover earlier this week. Will it be different this time?
The EFA (I-fund) rallied over 1%, trying to keep up with the US rally. There's no denying that this is a bullish looking chart, but it also looks vulnerable to a profit taking pullback at some time in the near future.
Yields spiked higher for some reason yesterday. Q1 GDP wasn't awful but nothing great. And a rally in yields generally means selling in bonds, and the BND (Bonds / F-fund) chart is working on negotiating some of those open gaps in the area. I see this as a positive for the F-fund, but it may breathe in and out a little first.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
