Earnings reporting season is upon us and investors are rigorously evaluating incoming corporate earnings reports and economic data. With the bar set so low for the second-quarter earnings, it is possible that positive surprises can set the stage for the next sustainable rally.
NASDAQ Composite (COMPQ), NDX 100 Index (NDX), and many Technology related names such as MSFT and AMZN have recorded negative outside days on 7/13/20. This suggests the Technology sector which has been the best performing sector this year continues with its near-term consolidation.
Despite the recent weakness, we suspect Technology, Telecom Services, and other secular growth areas will soon stabilize and resume their bullish intermediate-to-longer term uptrends. In the meantime, it appears there are healthy rotations into Consumer Discretionary, Healthcare, Consumer Staples, and Materials. This is probably one of the reasons the market correction that started in early-June 2020 has been contained so far.
In summary, the alleviation of overbought conditions and the expanding breadth in cyclical sectors and other sectors is technically constructive to the resumption of the March 2020 market recovery. Attached are key US indexes including S&P 500 Index (SPX), Dow Jones Industrial Average (INDU), New York Composite Index (NYA), and the NASDAQ Composite Index (COMPQ). Also included are the updated technical levels (i.e., supports and resistances).
S&P 500 Index (SPX – 3,215.57)
Ascending triangle pattern?
Technical base = 267.47
Breakout > 3,233-3.328.28 --> 3,393.52 (2/19/20 high), and 3,505.75
Support = 3,153.5-3,184, 3,115.70-3,127.66, 3,032-3,060.5, and 2,966-3,000
Dow Jones Industrial (INDU – 26,734.71)
Technical base = 2,737
Breakout above 27,071-27,580.21 --> 29,568.5 and 29,908-30,312
Support = 26,102-26,223, 25,507-25,523.5, and 25,153, and 24,843-24,971
New York Composite Index (NYA – 12,350.11)
Technical base = 1,311
Breakout above 12,420-12,837 --> 13,654-13,931 and 14,148-14,183
Support = 12,222-12,243, 11,825-11,963.5, 11,660, and 11,525-11,579
NASDAQ Composite Index (COMPQ – 10,473.83)
7/2/20 Ascending triangle breakout
Technical base = 819
7/2/20 breakout above 10,222 --> 10,519-10,605, 10,825 and 11,041
Support = 10,182.5-10,222, 9,743-9,856, 9,664, 9,325-9,403, and 9,144