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The Momentum Trade May Be Ending

Jul. 23, 2020 6:12 PM ETApple Inc. (AAPL), AMZN, INTC, NFLX, QQQ2 Comments
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July 23, 2020


Macro – SPY,

Mike Reading The Markets Premium Content – $35/Month or $300/Year


Nasdaq 100 (QQQ)

Stocks fell sharply with the NASDAQ 100, dropping almost 2.7%, and the S&P 500 falling by 1.2%. We have seen these fast and sudden drops many times over the past few months. They seem to happen for one day, followed by a sharp move lower the next morning, and then proceed higher again. That has been the trend since April. I'm getting the feeling this time may be different.

The amount of put buying I have been seeing in the QQQ has been consistent now since the beginning of July. I talked about again on the morning call. Again, just passing the message the market sends along. (Premium content - Morning Write-Up)


Yields on the 10-year fell today to 58 bps and are pretty close to that 55bps level we have been watching with great interest. If that level breaks, it likely falls back to intraday low on March 9 of 36 bps.

Apple (AAPL)

There was a difference today when compared to prior sell-offs; most notably, it was Apple. During this whole bull run that started at the end of March, Apple has never fallen below its uptrend. Today it did, and it closed below it. It also came on hefty volume. It wasn't helped by the fact that there were rumors the newest iPhones will be delayed and not announced in September.

I would consider today's price action a huge deal. It could be what I called on the midday call - a momentum shift. (Premium content - The Momentum Trade Is Breaking)

That said do I think this start of something more serve than what we have seen in the recent past, I obviously can't say with certainty, but something did materially change today.

Amazon (AMZN)

Amazon has now given back all of its gains from Monday, and that is also a big deal because from what I can tell, that is the first time the stock has made a lower high. It hasn't made a lower low yet, but that maybe tomorrow. I still think this one is falling back to the uptrend around 2850.

Intel (INTC)

Intel is getting smoked tonight after reporting results and giving weak guidance, and another delay of their 7nm chip. Right now, the stock is trading at $54.60 and is down 9.7%. If the stock closes tomorrow below $55.90, you have a head and shoulders pattern, and that could mean even steeper losses to come, maybe $50.25.

Netflix (NFLX)

Netflix managed to hold its uptrend finishing the day around $475. If the stock falls below $475, the flood gates open. The uptrend is broken, and it set up a decline to $448, and probably $405.


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