The reason I stated yesterday night that today’s bullish follow-through on MU’s earnings gap was so important is because we are in a sideways corrective market where bullish follow-through has been unreliable. SPY once again gapped up into the major resistance at $738.50 before selling off for most of the day.
At this point, if SPY can gap above that level and show real strength, I think it has a good chance of pushing toward the $752 area. Keep a close eye on that resistance over the coming days for a potential bullish setup. On the other hand, if we continue breaking down and start closing below the $724 support level, I suspect we see a quick move back into my preferred buy zone between $715 and $695.
SPY Daily Chart
DIA also threw another upper wick into new all-time highs, stopping out my short before once again finishing with a bearish reversal candle. Thursday was characterized by sector rotation. A large portion of the market finished green while big tech, software, and consumer defensive names were mostly lower on the day.
Financials had a strong session, although much of those gains faded into the close just like the broader market. I still like the banking sector for potential swing trades. When DXY is strong and trending higher, banks can often benefit while money rotates out of technology. I am keeping an eye on some of these larger double bottoms on AXP, V, COF and WFC.
AXP Daily Chart
The Hyper Spenders
Many of the big tech leaders have now broken key support levels and are looking quite weak. I heard the term “hyper spender” today, and that pretty well sums up how the market is viewing these companies. The hyperscalers have become hyper spenders, and investors simply are not trusting the massive capital expenditures they continue to announce.
The only reason QQQ is not significantly lower right now is because the semiconductor stocks are holding up much of the technology sector. For now, I am perfectly happy waiting for better entries and cleaner setups within the big tech hyperscalers.
If NVDA closes below its 200-day SMA, the odds of the it making another new all-time high over the next few months drop dramatically. The same goes for AAPL and GOOGL.
AMZN had one of the more bearish set ups I have seen in quite some time, which is wild because on Wednesday morning I would have told you it was showing excellent relative strength. That relative strength completely disappeared by the close. It finished the day with a massive inverted hammer at the 200-day SMA, then opened the on Thursday below the 100-day SMA, the 200-day SMA, and the prior three days of candles that had been desperately trying to hold support.
That opening gap was a major red flag for the bulls and the point where risk management should have kicked in if it hadn’t already. From here, I think AMZN likely works its way back toward the $215 area and the 100-week SMA. If that happens, it will have given back essentially all of its April and May gains.
AMZN 3 Day Chart
MSFT has already erased all of its April and May gains and then some. From the looks of the chart, I do not think it is finished even though it is at a massive horizontal support level. The chart is completely broken, and I think there is a reasonable chance it eventually reaches the 100-month SMA near $284 before this correction is over.
META also continues to weaken, and I do not think it is finished either. I think it likely undercuts the March low and fills the gap around $506. From the way the chart looks today, META investors could be in for a lot more pain.
Robinhood Markets (HOOD)
One chart that I find particularly intriguing is HOOD. I go through a complete technical breakdown in the video above, but here is the short version.
HOOD is either in a larger degree fourth wave correction that could take it back toward $50, or it has already started a fifth wave that could eventually carry it toward $200.
As long as HOOD continues holding its 100-week SMA and produces overlapping sideways corrective price action on the way down, I will continue to assume we are in the fifth wave. However, if we start seeing clear five-wave declines off the highs, accelerating downside momentum, rising volume on the selloff, and key support levels begin breaking, I will assume we are instead in a larger C wave. If that happens, I will step aside and wait for lower prices and a clearer setup.
If you want the full breakdown, including my wave count, key support levels, risk-reward analysis, probabilities, and trade plan, watch the video above.
HOOD Daily Chart
