AMAZON TESTS OLD HIGH ON STRONG EARNINGS -- THE NASDAQ TESTING SEPTEMBER HIGH -- SLIGHT NEGATIVE DIVERGENCE FOR THE SPX -- SELL IN MAY?

AMAZON RALLIES ON STRONG EARNINGS... Amazon was the last of the big five tech stocks that reported earnings this week.   And it reported strong quarterly profits as did the other big tech stocks.  Of those four, Facebook and Alphabet gained ground while Apple and Microsoft pulled back on the strong earnings.   As suggested in my last message, how stocks react to strong earnings can tell us something about the stock's technical condition.   So far, the stock's reaction has been positive.   But it's undergoing an important test.  Chart 1 shows Amazon.com climbing today to the highest level in seven months and in the process of testing its early September peak.  Its relative strength ratio in the upper box is turning up as well after several months of relatively weak performance.

NASDAQ TESTS FEBRUARY HIGH...The Nasdaq market is also testing overhead resistance.  Chart 2 shows the Nasdaq Composite Index up against its February peak.  It's the only major stock index that has yet to clear that chart barrier.   The Nasdaq is heavily influenced by the technology sector which has been one of the market's weakest sectors over the last week.   Any pullback from current levels could lead to a period of sideways consolidation.

S&P 500 SHOWS SLIGHT NEGATIVE DIVERGENCE...Chart 3 shows the S&P 500 pulling back today after hitting a new record yesterday.  While it's trend is still clearly higher, is too may be vulnerable to some consolidation.   Chart 3 shows its 14-day RSI line starting to weaken from overbought territory over 70 and forming two declining peaks (see arrow).   That type of negative divergence often leads to a short-term pullback or a period of sideways trading.

SELL IN MAY?... According to the Stock Trader's Almanac, April marks the end of the best six months of the calendar year beginning in November and the start of a seasonal period of weaker performance over the next six months.   That's the genesis of the "sell in May" slogan which often leads to some profit-taking during that month.   While that's only a seasonal tendency, it may be worth keeping in mind with a stock market that looks stretched on the upside.