AAPL & AMZN Earnings on Tap; Bonds at New Lows

Yields are becoming a problem.

Yesterday, we talked about Fitch’s downgrade being the “excuse” for a potentially larger correction in US stocks. The more I look at this price action, the more it seems like that’s the case. The S&P has been on a tear, but now we have some negative catalysts lining up. 

Bonds are still getting beat up and are at new YTD lows this morning. 10-year yields hit new 2023 highs yesterday and even though they backed off those highs by the close, they ended the day above 4%. Yields are strong this morning too, currently trading above Wednesday’s high.

(Upward pressure on yields is a net negative for stocks, especially tech). 

However, tech is likely to boil down to just two stocks, at least in the short term. That’s as earnings from AAPL and AMZN are on tap after the close tonight.

FAANG has played a pivotal role in the robust 2023 performance of the Nasdaq and S&P 500. In fact, the worst-performing components are NFLX and GOOGL, which are up 45% so far this year. While the group’s performance is impressive, it does also present a risk.

Breadth has improved considerably, but will the rest of the market be able to prop up the indices if AAPL and AMZN (and FAANG) falter?

Weak seasonality trends and high rates (even with the Fed on pause) aren’t helping matters.

*deep breath*

Despite some negative catalysts piling up, remember that we’re firmly in an uptrend.

For short-term traders, it rarely pays to get short into the hole. With the S&P down ~75 handles in two days, is now really the time to get super bearish?

For intermediate-term traders and/or investors, ask yourself: Would it really be so bad if we consolidated — either through time or through price — some of these recent gains in the seasonally weaker months of the year (August and September) potentially setting up for a solid opportunity in the seasonally strong portion of the year (Q4)?

And one last thing: Traders positioning ahead of Apple and Amazon’s earnings after today’s close also have to take Friday’s pre-market jobs report into consideration as well.

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Technical Edge 

• NYSE Breadth: 21% Upside Volume

• Advance/Decline: 22% Advance

• VIX: ~$16.75

SPY

Yesterday the SPY broke $451.50, then this area flipped to resistance. The close wasn’t inspiring necessarily, but currently trading just below yesterday’s low, traders have to be on watch for a quick reclaim of this level ($449.35). 

If we set up in that manner, bulls could have a low-risk bullish reversal setup, with a stop-loss just below today’s low. Keep an eye on those 0DTE call options in that scenario, as they’ll be active.

• Pivot: $449.35

• Upside Levels: $451.50, $452.50, $453.50

• Downside Levels: $446.50 to $447, $444 to $444.50

SPX

• Pivot: 4505

• Upside Levels: 4528.50, 4537, 4546-50

• Downside Levels: 4480, 4555-60

S&P 500 — ES Futures

Keep an eye on yesterday’s low at 4527.75. If we can shoot above it after the 9:30 open, it could fuel a move back into the 4540s and with any luck, the 4550 to 4560 area. 

• Pivot: 4527.75

• Upside Levels: 4548, 4550-60, 4573

• Downside levels: 4510, 4493-4503, 4460

NQ 

The 15,500 area failed as support and now the NQ is finding its footing near the 15,400 area. There we find the 200-unit moving average on the 4-hour chart and a prior breakout area. 

• Pivot: 15,430

• Upside Levels: 15,520-550, 15,625

• Downside levels: 15,340, 12,250-75

TLT

Last week, I had mentioned that if the $99s can’t hold, then the $95s could be on deck for TLT. Yesterday, the bonds made a decent stand off the lows, but back under pressure this morning and the $95s are on tap. 

Let’s see if they find their footing in this area, which is the 78.6% retracement and the gap-fill level.