May 3, 2018 Sunnyvale / CA / USA - Amazon logo on the facade of one of their office buildings located in Silicon Valley, San Francisco bay area

Stocks Are Likely To Drop On July 30 After Amazon’s Massive Guidance Miss

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

Otherwise, enjoy the column!

Subscribe to the Monster Stock Market Commentary and join the 2,562 subscribers getting it for FREE every day!

July 29, 2021

STOCKS – AMZN, FB

MACRO – SPY, RSP

Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL

Sorry for the miss yesterday; I was wiped out by the end of the day.

GDP had a big miss today, coming in at 6.5%. Normally, that would be a great number, but when expectations were for 8.5%, that’s a huge miss. Pending home sales also came in weaker than expected, falling 1.9% for the month versus estimates for a gain of 0.3%—disappointing economic data across the board.

It didn’t stop the S&P 500 from rising because bad news is good news. Obviously, if the economy is weakening, the Fed can’t taper, right? Well, that’s not entirely true. The Fed can easily taper, the economy is still robust. The problem isn’t the economy; equity market valuations are too high to be supported by the weaker growth rates. Eventually, investors will realize that the Fed is about to embark on a tighter monetary policy, just as economic growth is normalizing to lower growth rates, while valuations are at historically very high levels. \

S&P 500 (SPY)

Today, the S&P 500 hit resistance at the trend line and failed to hold it and not make a closing high. The momentum trends are still diverging, with the Advance/decline, RSI, and MACD all trending lower. At this point, I think we test the 50-day moving average at a minimum.

S&P 500 EW (RSP)

Meanwhile, the equal-weight S&P 500 ETF (RSP) tried to break out. Technically, it had a new closing high, but this is just too close to call. We need confirmation of a breakout.

Amazon (AMZN)

Amazon reported results, with earnings beating but missing on revenue by almost 2%. On top of that, the company guided third-quarter revenue to $109 billion at the midpoint of the range vs. estimates of nearly $119 billion. AWS had revenue of $14.8 billion, which came in line with the high end of estimates. This is a big problem, when the street thought Amazon was going to grow revenue by almost 24% in the third quarter and guidance is for growth of around 14%, after growing by 27% in the second quarter. This will not be a one-day drop.

Anyway, we knew bad things tend to happen when the stock RSI reaches a level near 80. The next level of support is around 3150.

Facebook (FB)

Facebook was down 5% following its results last night. The stock has a gap that needs to be filled at $355 which should offer some support.

Anyway, that’s all I got.

Mike

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.