Stocks finished the week of July 30 lower, dropping by 40 bps. Amazon’s sales and guidance disappointment drove the weakness on Friday, and while the S&P 500 didn’t finish down all that much, we could wonder if last week served as a turning point for the market overall.

This week, we will get a ton of economic data with the IMS PMIs, as well as the ADP and BLS job reports. The Job reports will be more important than in the past as it is clear now that the Fed is waiting on the employment portion of their dual mandate to start the tightening process. (Premium member content – 2-week free trial —RTM – Fed: Dovish Now, More Hawkish Later).

So we could very well be in a scenario where a strong job report adds to the weakness seen on Friday. Of course, on the opposite side of things, job weakness could be a positive for stocks.

Market Breadth

The number of stocks making a new high in the NASDAQ has been declining and diverging from the rising index level. Again, this is just another way of measuring the underlying breadth in the market and suggests that the rally’s broadness continues to wane. Something similar occurred in the 2015/16 cycle and 2018.

Additionally, we can see that the number of stocks making a new high on the NYSE is also declining as it did in the 2015/16 and 2018 cycles. As I have noted these are just a few more example of the similarity of today and the 2018 equity market cycle. 

S&P 500 (SPY)

Overall, there remain plenty of signs that suggest an overall weakening of the broader equity market. Still, to this point, the S&P 500 has yet to give up, as it manages to find enough rotation every week to keep things moving higher. However, the path of the SPX is shifting to some degree, with a trading channel that is now narrowing. Additionally, we see downward sloping trends in the RSI, MACD, and the Advance/Decline line.

The index has also failed to reclaim the 2020 low trend line after attempting and failing two times.

At this point, there is enough evidence to suggest that this week we see a push lower to 4,330. However, the trends would suggest a steeper decline is likely to come at some point over the medium term.

Value over Growth (SPYV, SPYG)

It would also seem that we see a return of value outperforming growth. It doesn’t have to mean that value rises and growth sinks. It could also mean that growth falls faster than value. This is only a relative chart, and it tells us nothing more than value outperforms growth.

Amazon (AMZN)

Amazon fell sharply on Friday, and despite many thinking the worst may be over; history would suggest the selling is not finished yet. Could the stock bounce and attempt to fill the gap this week? Sure. However, it seems unlikely this stock makes a new high any time soon, and it seems more likely that the path of least resistance will remain lower for some time come. (Premium member content – 2-week free trial — RTM -Amazon May Be An On Going Concern)

Square (SQ)

Square will report results this week, and you cannot like its odds given PayPal’s poor showing. The stock has failed now 3 times to overtake the $270 level, and the 200-day moving average is the only thing keeping the stock up. The RSI and MACD tell us that momentum has shifted lower, and I would not be surprised to this stock sub-$200 over the next month.

PayPal (PYPL)

PayPal tumbled this past week following weaker guidance. It also failed to make a new high, and it could be setting up a longer-term double-top pattern. Only time will tell here.

Roku (ROKU)

Roku will also report results this week. The valuation here is beyond obscene, and the only thing pushing the stock higher is the good old gamma squeeze, which will be over once earnings come this week.

The momentum indicators tell us the stock goes lower, the Bollinger band tells us the stock is overbought, and the stock failed at resistance at $485. The stock’s next level is likely to come at $385.

Acadia (ACAD)

Acadia will report results this week. I have no idea about this one anymore. Such a promising future has been shattered, and perhaps this week, we will find out the fate of the Type A meeting. In a transcript from the June 8 presentation at the Goldman Sachs Global Healthcare Conference, Steven Davis noted the company submitted the material for the Type A, and he noted at that presentation the company should be able to provide an update at the time of the second-quarter conference call, which is this week, August 4.

The company appears to be getting a bit more aggressive in its marketing of the results of the DRP trial, with those results showing up in the New England Journal of Medicine while presenting data at the end of July at the Alzheimer’s Association International Conference. Maybe that is a positive sign? Of course, things may not have gone well, and now they are trying to build some community awareness when the meeting results are presented.

The stock has traded the last few days horribly, but the Biotech sector has too. The options market is very quiet and tells us very little.