The market is shifting as tech stocks fall and small caps rise. And with major tech companies reporting earnings this week, the sell-off could intensify. I showed which stocks are now rising, and what moves investors should make this week to protect their portfolios in Sunday night’s video, which you can watch here.
Last Week Recap
The tech sell-off continued last week with the Nasdaq down another 2.5%, and the S&P 500 falling almost 1%. But the DOW was green, up 0.75%, and the Russell 2000 rallied a massive 3.4%. This is a clear sign that the stock market isn’t crashing, but rather shifting. Money is moving out of the mega-cap tech stocks that have rallied to insane highs, and is moving into small-cap stocks, which continue to trade below their 2021 highs.
Unfortunately tech earnings last week were not good, as Tesla saw its stock fall over 8% and Google fell nearly 6%. With major tech companies reporting earnings this week including Microsoft, Apple, Amazon, Meta, AMD, Arm, and Intel, the tech sell-off could continue this week if earnings continue to disappoint.
Last week’s economic news did help the DOW and Russell 2000 however. Over the weekend, Donald Trump warned Jerome Powell not to cut rates before the election. That caused a slow start to the stock market initially. But while PCE came in-line with expectations, GDP came in much better than expected. That led to hopes that the Federal Reserve would be able to pull off the first ever soft landing, and caused the DOW and Russell 2000 to rally. Futures traders are now pricing in two rate cuts this year – one in September, and the second in December.
Market Sentiment
With the tech sell-off continuing last week, the CNN Fear and Greed Index (https://www.cnn.com/markets/fear-and-greed) closed the week down slightly to 45. That keeps it in the Neutral stage for now, but just 1 point above Fear. The CNN Fear and Greed index was deep in the Fear stage on Thursday, but Friday’s market rally helped lift it to borderline Neutral.
Most notably, Market Momentum, which has remained in Extreme Greed for months now, finally fell down to Neutral last week. Stock Price Strength rose back to Greed though, as the broader stock market starts to rally in the face of the tech sell-off. Options traders are in Fear though, indicating a continuation of the tech sell-off that started two weeks ago.
With most stocks rising, despite tech stocks falling, the VIX finished the week flat, down just 0.79%. The VIX remains in the Neutral stage, lining up with the CNN Fear and Greed Index.
Technical Analysis
The daily technicals became even more mixed last week. So depending upon which stocks you’re looking at, the market is either extremely bullish or extremely bearish.
The DOW and Russell 2000 are both bullish. The DOW is 90% bullish, while the Russell 2000 is 100% bullish. The DOW is being hurt by the tech stock sell-off, as a few tech stocks were recently added to the DOW. Healthcare stocks, which followed tech stocks in the rally over the past two years, and are now following tech stocks in the sell-off, are also down. Eli Lilly, ticker LLY, is down nearly 17% over the past two weeks. The rest of the stocks have been rallying however, causing the DOW, and especially the Russell 2000, to become extremely bullish.
The S&P 500 and Nasdaq, on the other hand, are extremely bearish, both 100% bearish in-fact. And if the tech sell-off continues this week, the bearishness is going to get even worse. Both indexes have already seen death crosses on both the MACD and EMA lines. Now the question is, “How far will they fall?” Tech earnings this week will answer that question.
The weekly technicals are now in-line with the daily technicals. The weekly charts had been 100% bullish for a while, but have now changed. The DOW and Russell 2000 are now 100% bullish, and the NASDAQ is now bearish. The Nasdaq just turned bearish though, so we could be in for more pain ahead before it bottoms out.
The S&P 500 is kind of stuck in the middle though. While the tech sell-off has hurt the S&P 500, the fact that most stocks are now rising has actually helped limit the losses for this index. While dropping and on the virtual edge of turning bearish, it’s still 100% bullish for now. So the S&P 500 still has a chance to bounce here. Tech earnings this week will determine what actually happens though.
Economic News
Significant economic news is being released this week, although it probably won’t have a major impact on the market as it gets overshadowed by the tech earnings this week.
Wednesday is a busy day with ADP private payroll numbers being released in the morning, followed by the FOMC interest rate decision and Jerome Powell press conference in the afternoon. While the Federal Reserve is widely expected to keep interest rates the same at this meeting, everybody will be listening for hints from Jerome Powell on a possible rate cut in September. CME futures are currently pricing in a 100% chance of a rate cut in September, while Kalshi traders are pricing in an 81% chance of a rate cut.
Then on Friday we get the official jobs numbers for July, which are expected to show the unemployment rate steady at 4.1% with a slight decrease in the year-over-year hourly wages.
Day traders should watch out for numerous economic readings being released at 10am each day this week, as they could cause temporary volatility in the markets.
Here’s the full list of all of the economic news coming out this week as well as the time each report is being released: https://www.marketwatch.com/economy-politics/calendar
Here’s what time each Fed member is speaking this week: https://www.federalreserve.gov/newsevents/calendar.htm
Earnings
This is the biggest week for earnings by far, with nearly every mega-cap tech stock reporting earnings this week. Tuesday before the open we have SoFi, PayPal, Pfizer, BP, and P&G all reporting earnings. Then Tuesday after the close, we have AMD, Microsoft, and Starbucks reporting. That is followed up Wednesday after the close with Meta and Arm. Then Thursday before the open we have Moderna, before we get Amazon, Apple, Intel, and Coinbase all after the close. Earnings switch over to energy stocks on Friday before the open with ExxonMobil and Chevron reporting.
Crypto
Crypto, which was already rallying, got a huge boost from Donald Trump over the weekend. Donald Trump promised to set up a strategic crypto reserve, similar to the strategic gold reserve, if elected. Bitcoin is back above $69,000 and is approaching an all-time high once again. With the boost from Donald Trump, crypto has a real chance of breaking through the all time high resistance level and going on a massive rally. We’ll need to break above $74,000 to get confirmation though.
Other Things to Know
My new book has just been released! This is the ultimate trading journal, designed to help you become a more profitable trader. The book is available on my website at https://weprofit.io/books.
Multiple trading platforms continue to offer free stocks and high yields on cash. So get your free stocks while you still can at https://weprofit.io/platforms/.
To get this newsletter delivered to your email for free each week, add your email to the list here: https://weprofit.io/newsletter.
And if you haven’t already signed up for my free giveaways, you can do so by clicking the purple button at the bottom of https://weprofit.io/.
Wishing you the best of success trading this week,
Stock Curry