Stocks Rally On February 2, But Look Who May Have Crashed The Party

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2/2/2022

STOCKS – FB, AMZN, PYPL

MACRO – SPY, QQQ

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The market rallied today, but held where it counted on the S&P and Nasdaq Futures. The S&P 500 rose by almost 1% today, close at 4,589. The futures may have been more critical because it hit resistance at the downtrend, and that is where it stopped, which matters. We don’t want to see the futures rise beyond that 4,580 area. Otherwise, we start running into many problems technically.

The S&P 500 cash had risen just a little above our downtrend into that yellow triangle I mentioned yesterday. So why the difference in the downtrend? It could be several things, such as the different trading times or how I even drew it out. Despite the rally, the Advance/Decline fell, and the RSI is right at resistance.

NASDAQ (QQQ)

The NASDAQ Futures also hit resistance at the downtrend and are trading sharply lower this evening. I hope this ends the wave four counter-trend moves for the S&P 500 and the Nasdaq and starts wave 5 down. If these downtrends are worth anything, then they hold, and we revisit 4,430 S&P 500 futures and 14,530 on Nasdaq.

Meta (FB)

The decline this evening is due to Facebook, which missed on its fourth-quarter earnings, and then gave weaker than expected 1Q sales guidance. The stock is down over 20% tonight and trading to support at $255. There is a good chance this stock is also going back to pre-pandemic levels. I know it sounds crazy, but look at what is happening in stocks like PayPal, Netflix, Roku, Square, etc. They are all going back to or around pre-pandemic levels. Don’t rule it out.

PayPal (PYPL)

PayPal has obliterated today, falling back to $130, and finally filling the gap. The next support region comes at $125, and it is possible the lows aren’t in yet.

Amazon (AMZN)

If you own Amazon, you can’t help but feel a little nervous unless Amazon has a trick up its sleeve like a stock split; you have to wonder what happens if they miss any metrics. You have to think they are seeing higher costs, and as I have noted, retail sales in December were weak, so I can easily see some margin pressure. That means AWS has to put out a stellar quarter because so much of Amazon’s operating income comes from AWS. There will be no room for error for these guys tomorrow. But when you look at the chart, you have to wonder what the market already has priced in or worse, already knows.

We will see what tomorrow brings.

-Mike

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