Weekends are a great time to take a step back and rip through thousands of charts to see what’s really going on. The S&P500, Dow and all those other indexes can only provide so much information. At a certain point, you need to get your hands dirty and a really look under the hood.
This weekend was especially informative because we got new Monthly Charts on Thursday and new Weekly Charts on Friday. That’s like Christmas for me.
Today I want to go over a few of the most important charts we want to keep an eye on going into the “Sell in May and Go Away” period.
The first one is Amazon. According to my trusty calculator, this is the 3rd largest stock on earth, by market cap. I’d like to point out how with new all-time highs this Thursday, 1) price could not hold those new highs for more than a few hours, 2) Relative strength put in lower highs, diverging on that final thrust, and 3) Momentum diverged negatively vs its February highs AND one final time this week for good measure:
If this is what it appears to be, I think it means big trouble for Amazon, and therefore the market as a whole. If $AMZN is below 2400, I think a bearish approach is most appropriate:
Here we’re looking at the Polarity Principle play itself out in real time. That former support from late 2018 has now turned into 4 weeks of resistance in arguably the most important sector in America. Historically, Industrials move the closest with the S&P500 of all the S&P Sectors. So if “stocks” are going higher, Industrials really need to get/stay above those 2018 lows. A bearish approach is most appropriate if $XLI is below 63:
Meanwhile, does this look like a major reversal of a downtrend? Or does this look like a classic continuation pattern? A quick glance points me to the latter:
If Amazon falls apart here, Industrials fail to get above the late 2018 lows and European Banks start rolling over again, then this is what that environment probably looks like:
Have you wondered why Bonds and Gold have done so well throughout this bounce in stocks since March?
I don’t have all the answers, but Technical Analysis helps us ask the right questions.
I think these charts above, $AMZN, Industrials and European Banks will provide some excellent clues for the market’s next direction.
What are you seeing out there?
Any charts stand out to you this weekend?