This will be one of the busiest weeks of 2021, with all of the mega-cap companies reporting results and an FOMC meeting on Wednesday. It will likely set the tone for the next three to four months for the markets, and the way markets move these days, things can change a lot over that period of time; it could mark a turning point for stocks.

The S&P 500 finished the week of July 23 at a record, as did the Dow and the NASDAQ. However, as pointed out in previous days and weeks, beneath the surface, it seems as though the number of stocks leading the market is a shrinking list, with just a handful of stocks pushing the markets up. The Russell 2000 hasn’t made a new high since the middle of march, and the percentage of stocks in the S&P 500 above their 50-day moving remains at weak levels. Additionally, we have seen the advance-decline line weaken and is now formally diverging from the rising in the S&P 500.

This has a familiar and eerie feel to the divergence witnessed heading into the fall of 2018. I mention this because this is not the only item in the past several weeks that have reminded us of 2018, which we all remember was a very volatile year. In the fall of 2018, the advance-decline began turning lower before the S&P 500 eventual big fourth-quarter slump.

Housing Sector (HGX)

There is also, of course, the issue of the PHLX Housing Index, which has fallen materially from its May peak and has been trending lower and diverging from the S&P 500 index for more than two months now. This is a similar pattern to what was also seen in 2018.

Dow Jones Transports (DJT)

There is also the issue of the Dow Jones Transports diverging from the S&P 500, which also occurred in the fall of 2018.

Finally, the percentage of stocks in the S&P above their 50-day moving average is around 50% and trending lower, which would suggest that overall component momentum is falling and that fewer stocks are leading the index higher daily.

Apple (AAPL)

The problem is that many of the mega-cap stocks have run up a lot into earnings, and at least over the past couple of quarters, the results have been a sell-the-news event. At least for Apple the past two quarters, with the stock seeing big moves lower following the results. Couple that with the stock recently seeing its RSI soar to well above 80, and this Tuesday results could very well be a sell the news event. The last time Apple had an RSI above 80 this close to earnings was in April 2019, followed by a 20% decline. For Apple in general, an RSI this high tended to lead to a big sell-offs in the days and weeks that followed.

Amazon (AMZN)

Amazon has seen its RSI move above 77 five times since 2018. Three of those five times came ahead of results, with the stock falling by 15% two times following results and rising by around 11% once. RSIs in general for Amazon above 77 have led to big draws in the weeks that follow.

Microsoft (MSFT)

Microsoft will post results also in every overbought territory with an RSI over 75. This hasn’t happened often for Microsoft, just two times. Both of those times found the stock lower by 5 to 12% over the following days and weeks.

Alphabet (GOOGL)

Alphabet has also seen its stock run up heading into results in the past, just like it is now, with an RSI that stands at more than 74. Since January 2018, the stock has run up this aggressively ahead of results four times; all four times the stock fell by more than 20% in the days and weeks following results.