July 6, 2020

STOCKS – AMZN, ZM, ROKU

MACRO – SPY, QQQ, 

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S&P 500 Futures

Stocks had a strong day, finally breaking above the critical level of resistance around 3150.  It was a strange day because primarily the futures pretty much never traded higher than the morning session, just flatlining around 3170.  It doesn’t mean much, other than the index appears to found its next level of resistance. 

It also doesn’t tell us much about the downtrend that is overhead around 3190. 

ISM

The ISM Data was much stronger than expected, but I’m beginning to believe the ISM data at this point is worthless in this environment. All it is telling us is that the services sector improved versus last month, and it doesn’t take much to improve versus the previous month.

Repo’s

Also, the NY Fed’s repo activity was $0. Repurchase agreements continue to decline, which means less liquidity for the banks to play with.

S&P 500 (SPY)

We can also see that the S&P 500 cash index rose to resistance at 3,180. It fills a gap that was created on June 10. So again, we can ask the question of what happens from here. Typically when a gap is filled, it resumes the prior trend, which in this case is lower. So if we can push beyond 3,180, the S&P 500 has a clear shot of getting back to 3,230. If it fails, it likely results in a drop below 3,150.

Ultimately, we will find out if the pattern in the chart represents an island reversal at the beginning of June.  So the next day or two will be telling about the future direction of the overall index. For now, the path of least resistance appears to be up. 

NASDAQ (QQQ)

The Qs are back to the upper end of their trading range again, and usually, that means one thing. A reversal back to the lower end of the trading range, what is the 6th or 7th time we have seen this pattern since April. 

Amazon (AMZN)

Amazon appears to be following the same pattern it had in April, with a massive run-up ahead of results. The valuation on Amazon is getting stretched here, and I get it; the company is the dominant force today. But this company spends a lot and cares very little about meeting the market’s expectations. So just keep that in mind. 

That pattern in the chart is a rising wedge, and I know it looks like it broke, but many times I have seen the same thing happen in the past only for a stock to turn lower and push back through the lower end of the wedge.  So be careful, 2,450 is still possible. With an RSI of 80, the stock getting way ahead of itself. 

Zoom (ZM)

Zoom didn’t participate in today’s rally and continues to fail around the lower bound of the rising wedge pattern. I’m not sure that much has changed here at all. Volume levels today were materially higher. Lower still seems about right.

Roku (ROKU)

Roku is very close to a big breakout should it get above $135.50, and on its way to $150.

Thanks all for today. 

-Mike

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