AMAZON WEIGHS ON CONSUMER CYCLICALS -- LAM RESEARCH LEADS SEMIS LOWER -- EXCEPT FOR AMAZON, BIG TECH STOCKS ARE HAVING A RELATIVELY STRONG WEEK
AMAZON SELLOFF HURTS CONSUMER CYCLICALS... Stocks in general are undergoing some profit-taking today. And consumer cyclicals are one of the day's weakest groups. A big reason for that is today's big drop in Amazon.com (AMZN). Chart 1 shows that influential stock dropping -7% today on last evening's reported drop in first quarter earnings. And it's now testing initial chart support along its late-April lows near 2300. If that doesn't hold, more substantial support is likely along its February peak at 2185. The upper box shows its 14-day RSI line starting to weaken from overbought territory over 70. And its daily MACD lines (middle box) are in danger of turning negative for the first time since mid-March. That raises the possibility of more profit-taking to come. Because of its size, what AMZN does has a big influence on the direction of consumer cyclicals which are trading lower today.
CONSUMER DISCRETIONARY SPDR PULLS BACK FROM 200-DAY LINE...The daily bars in Chart 2 show the Consumer Discretionary Sector SPDR (XLY) pulling back sharply from its 200-day moving average. Some of its biggest losers include cruise lines, hotels, and gaming stocks which have rebounded over the past week. Today's drop in Amazon, however, is also a big reason for the pullback. That's because that stock accounts for more than quarter of the XLY weightings. So what AMZN does has a big influence on the XLY. Which today is negative.
THE CHIPS ARE ALSO FALLING... Semiconductor stocks are also coming under selling pressure today. Chart 3 shows the PHLX Semiconductor iShares (SOXX) down nearly -4% today and dangerously close to falling below its 200-day line. One of its biggest losers is Lam Research (LRCX). Chart 4 shows that chip stock already falling below its 200-day average to the lowest level in nearly a month. Selling in chip stocks may also start to weigh on the tech sector and Nasday which are still trading above their 200-day lines. With help from some of the biggest tech stocks.
NASDAQ STILL HOLDING IT 200-DAY LINE...The Nasdaq Composite Index is down slightly more than the other major stock indexes today, but remains above its 200-day average. That's important because the tech-dominated Nasdaq has been the strongest part of market during the spring rally. And it's been led higher largely by its five biggest stocks that include Microsoft, Apple, Amazon,com, Alphabet, and Facebook. The last two have had an up week on the back of strong first quarter earnings. Microsoft has also had a relatively good week. So has Apple (AAPL). Chart 6 shows that stock trading today at the highest level in nearly two months. Of those five, Amazon.com is the only weekly loser as shown in Chart 1. The direction of those five big stocks is very important to the Nasdaq and the rest of the market. That's because they account for 38% of the Nasdaq market and 20% of the S&P 500. At the moment, however, the biggest threat to the Nasdaq uptrend may be coming from weaker semiconductor stocks.
