📈STOCK INDEXES AT A CRITICAL SPOT
Indexes sold down ahead of NVDA earnings this evening on the heels of news out of Micron technologies (MU) and Target earnings. Target earnings were off and investors sold the stock down 15% on the day. Target (TGT) reported quarterly earnings of $1.54 per share which missed the consensus estimate of $2.13 by 27.7 percent. This is a 49.17 percent decrease over earnings of $3.03 per share from the same period last year. Target said the outlook for next quarter was cloudy in an 'increasingly challenging environment. MU announced that in response to market conditions, the company is reducing DRAM and NAND wafer starts by approximately 20%. This led to 7% decline on the day. NVDA earnings on the whole missed earnings expectations but beat on the revenue front. The stock was trading flat to up slightly this evening. This is all coming on the heels of being at a critical spot for the stock market.
Below is the percentage of stocks above the 50 day simple moving average. You can see the lows marked by the pandemic and then again by recent events. More importantly are the highs. Over 80% is considered over bought. Think of it as Fear/Greed index.
If we take a look at the over 80 readings on the SPY we can see that declines happen around this event. This does not mean that we are destined to take the lows of the indexes again but it does mean we might pullback and backfill or take a rest. Below is the SPY with arrows denoting 80 readings.
Another indicator we must watch is the Russell 2000. Small cap stocks respond the fastest to interest rates. As you can see the index (IWM) has rejected every time this year that we touched the 200 SMA. Today we made a lower low which can be viewed as a confirmation move. This would confirm the rejection.
What is more troubling is the decoupling of 10 year treasury and the IWM. As bond yields drop the IWM goes up. Small caps benefit the most from interest rates. We are seeing 10 year treasury (TNX) in orange and the IWM in green decouple. Meaning they are buying bonds but the IWM is dropping. We need to watch this closely. It is possible the IWM got ahead of itself but its still a spot we need to be aware of.
For now we will monitor the indexes and key levels.
Tonight’s Video covers NVDA and CSCO earnings, The overhang on TSLA , The indexes in greater detail and several other stocks that our poised to move tomorrow.
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