Despite positive economic data stocks closed the session near lows, but it was after-hours movement that stole the show. AMZN rocketed higher after reporting better than expected results. V did as well and both were higher after-hours. Despite the after-hours session the actual trading session itself was not kind to the S&P 500. The large cap index saw another day of distribution increasing the count to seven. A hefty amount for now. Over on the NASDAQ we only see a distribution count of four and with the way AMZN has performed tomorrow it will be difficult to see one for the NASDAQ. Despite macro-economic headwinds this market, at least on the NASDAQ has held up relatively well. Given the high number of distribution days on the S&P 500 caution is warranted.
From a macro-economic standpoint the economy is not in good shape. Just take a look at XLI, XLB, and IYT. Not the pillar of strength from these three names. If the economy is doing so well why would industrial, material, and transportation stocks be struggling? Price action certainly is pointing to weakness. We are not macro-economists, but from a price standpoint something is not right with these industries.
AMZN is one of our four horseman and with the breakout after-earnings it should push us higher. However, given the size of the move it does give us some pause. If you are holding AMZN it would be wise for you to at least trim a good portion of your position size. A move like this is a gift on earnings and you can always reload at a proper buy point.
GOOGL was last week’s big earnings winner and now has broken the breakout low. Never a good sign to see a stock step below its breakout low. Not a terrible sign, but it is not a good one. It will be interesting to see how this plays out.
There are risks piling up. Sentiment is even giving mixed signals. Bulls are near lows as well as bears with those who are in the neutral camp continue to run high. So much for a clear signal.
The best course of action is to remain steadfast with executing the plan. Cut your losses and maintain proper risk adjusted position sizes. Get out and enjoy the weekend.
