We looked at the big technical reversal signals yesterday in the S&P 500 and Nasdaq–all led by the key reversal signals in Amazon, Microsoft and Apple.
Despite the new highs that were made in these stocks, following the big February correction, the short-term trend for the broader market remains down. And with the behavior in stocks today, those reversal signals seem more convincing that another leg of this downward trend is upon us.
Let’s take a look back at those key signals.
Apple, Microsoft and Amazon led the charge back in the Nasdaq back to new record highs early this week. Those three stocks represent about a third of the index (and contribute heavily to the S&P 500 too). But as the three tech giants led the way up, they cracked yesterday, and we now have some very compelling signals that another down leg for stocks may be here.
First, as the broader financial markets are still licking the wounds of the sharp correction, and still jittery, Apple hit a record high valuation of $925 billion this week (sniffing near the trillion dollar valuation mark). And then it did this yesterday…
As you can see in this chart above, Apple put in a huge bearish reversal signal (an outside day).
So did Microsoft (a huge bearish reversal signal).
So did Amazon, after breaching record levels of $1600 early this week …
And, not surprisingly, same is said for the Nasdaq – a big reversal signal yesterday…
The S&P 500 had the same reversal pattern.
For perspective, if we avoided the distraction of the big cap weighted indices, the Dow chart has told us the downtrend in stocks from the late January highs remains well intact.
This all looks like a scenario where stocks make another run at the February correction lows.
But the bears shouldn’t get too excited. When we start seeing first quarter earnings hit and first quarter growth data we’ll likely see the resumption of the big bull market for stocks.
