Big corporations rolling over after months of relentless rising
The current earnings season in the United States brought forth intriguing results. Nevertheless, we have seen some adverse reactions to relatively good results. For example, Alphabet (Google) lost about 10% following its quarterly earnings on Tuesday, despite its revenues and net income soaring (YoY) in 3Q23 by a significant margin (though it is important to note that the company missed some of the analysts’ estimates).
Based on multiple observations, we might be at the brink of rollover in the highly capitalized corporations (following months of relentless climb higher). This potential rollover represents a significant danger to the performance of the U.S. stock market indices (which were driven to heights mainly by these large companies). Now, they might start being responsible for driving them down.
With that said, we want to bring attention to the small caps, particularly Russel 2000. Unlike SPX or NDX, this index has not gone through an immense rally over the past year (something many people chose to ignore, calling for a genuine bull market). In fact, RUT is down about 6.7% year-to-date, telling us a completely different story about the health of the economy than SPX or NDX. In addition, we would argue that a lot of economic data reflects a better picture of the economy than reality suggests. As a result, we want to raise a word of caution to market participants.
Illustration 1.01
The picture above shows the daily chart of Russel 2000. The index is hovering just slightly above the 2022 lows.
Illustration 1.02
Illustration 1.02 displays the chart of Alphabet, Amazon, Apple, and NVIDIA.
Technical analysis gauge
Daily time frame = Bearish
Weekly time frame = Bearish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Based on multiple observations, we might be at the brink of rollover in the highly capitalized corporations (following months of relentless climb higher). This potential rollover represents a significant danger to the performance of the U.S. stock market indices (which were driven to heights mainly by these large companies). Now, they might start being responsible for driving them down.
With that said, we want to bring attention to the small caps, particularly Russel 2000. Unlike SPX or NDX, this index has not gone through an immense rally over the past year (something many people chose to ignore, calling for a genuine bull market). In fact, RUT is down about 6.7% year-to-date, telling us a completely different story about the health of the economy than SPX or NDX. In addition, we would argue that a lot of economic data reflects a better picture of the economy than reality suggests. As a result, we want to raise a word of caution to market participants.
Illustration 1.01
Illustration 1.02
Technical analysis gauge
Daily time frame = Bearish
Weekly time frame = Bearish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
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