4 Of Top 5 US Stocks Set To Report This Week, July Is Shaping Up As Potentially Bearish Shooting Star On Nasdaq 100

Tech stocks rallied massively in the past four months, with the leaders outpacing the soldiers by a wide margin. Last week, post-earnings reaction to several tech stocks including MIcrosoft (MSFT) indicated a ‘sell the news’ phenomenon. This week, four of the top five US stocks report. How they behave will decide how July shapes up, which thus far is on course for a potentially bearish shooting star.

Last week, tech bulls used June-quarter earnings as an excuse to lock in gains. Post-earnings, International Business Machines (IBM), Tesla (TSLA), Microsoft (MSFT) and Intel (INTC) all sold off. Before this, they all rallied massively from their March lows. MSFT is the one of the five largest US companies.

This week, the other four – Facebook (FB), Apple (AAPL), Amazon (AMZN) and Alphabet (GOOG) – report. FB reports on Wednesday and the other three on Thursday. Ahead of this, as the most valuable company with a market cap of $1.6 trillion, AAPL does not act well.

Two Mondays ago – on the 13th – the stock (370.46) rose to a new all-time high of 399.82 before reversing hard. Last Thursday, it breached a rising trend line from March (Chart 1). Both the 10- and 20-day moving averages have been lost. Friday was a down session, although buyers showed up just above the daily lower Bollinger band; the session low of 356.58 was not that far away from the 50-day at 350.93. A breach of the average opens the door to a test of the January-February highs in the 320s.

How AAPL, and the others, behave post earnings will have huge consequences for markets in general and cap-weighted indices such as the S&P 500 large cap index and the Nasdaq composite in particular. 

Investor love for these leading names has gotten to a level where they are beginning to control too big a slice of the overall market. In the Nasdaq 100/QQQ (Invesco QQQ Trust), the big five command a 45.4 percent weight (Chart 2), which is just a mind-boggling number, come to think of it.

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