NEW TREND To Be Confirmed THIS WEEK In The Stock Market [S&P 500 Technical Analysis]

published on August 2, 2020

Is a new trend now confirmed on the s p 500 and other wider stock market indices i discussed that along with big tech earnings in this video hello everyone i hope you're having a good weekend and

Firstly a happy eid mubarak to those of you who are also celebrating this weekend so we had a massive day in the stock market on friday it was a whipsaw day on the s p 500 from the 3 to 70 mark on futures

We went all the way back down to 3 220 and then all the way back up against a little bit range bound so we'll get onto the charts in just a minute i want to spend a little bit more time on technical analysis today but before that

We have to discuss the big tech earnings because they were very very interesting so let's start first of all with amazon so second quarter revenue jumped 40 percent from a year earlier earnings 10 30 cents

A share but what i'm interested in again is the forward guidance from these companies and amazon's forward guidance was very encouraging in terms of quarter three so the forward guidance and the current earnings both beating

Expectations now of course some of this is to be expected everybody was cooped up at home so there would have been more activity on amazon whether that trend changes that's the

Question here and we'll discuss that in just a minute as well but let's have a look at the other big tech stocks apple also very good earnings so revenue from iphone 26 billion dollars beating expectations of

21 billion it was the same with the ipad which tends to be a weaker source of revenue for apple historically but there was also an increase by over 1 billion and the imac

Also did very well some of that expected because more people obviously working at home or teaching their kids at home so they'll be more of a purchase of various apple devices and you can see

Here apple services also very strong as well so on track to reach 600 million paid subscriptions by the end of the year okay let's jump on to facebook and for facebook a big source of income is of course advertising revenue rose 10

To 187 billion again no surprise that there is an increase in obviously advertising revenue because people weren't advertising as much on billboards and other outdoor areas so

It made sense that google and facebook would definitely benefit but mark zuckerberg did talk about government privacy regulations and remember there was a bit of an ad boy ads boycott as well uh with

Facebook so this could possibly hurt revenue going into quarter three we'll see and that's reflected here where it said facebook ad revenue in the first three weeks of july so going into the next

Quarter was still in line with a decent growth rate despite the impact of certain advertisers pausing spend on platforms related to the current boycott so some concerns

Facebook had discussed one was for example the new ios update with apple soon to be released will put restrictions on tracking users across apps a tool that facebook relies on for

Targeting mobile ads that's with facebook's pixels so when you see companies uh almost uh feel like they're following you around the internet wherever you browse that's what's

Happening there finally alphabet not as strong so this was uh google's revenue falling for the first time ever i was a little bit surprised by this actually so ad sales had actually fallen

81 from the same period last year that's the lowest they've been since third quarter of 2018 and the first ever declined which was strange because facebook experienced

Stronger revenue growth but apparently towards the end of the quarter the uh ad sales were picking back up and this is another interesting thing yeah you have to be mindful of when it comes to tech stocks and i've discussed

On this channel many times first of all they don't have a lot of staff members anyway but also these big tech companies they've managed to leverage a lot of kind of automated systems in place so

Here it's interesting to see that google said workers could stay home working until july 2021 if they wanted to so massively flexible but again not great for the wider economy especially

Commercial real estate office spaces etc so what's the kind of summary when it comes to the tech stocks and and my opinion well for me first of all firstly i was wrong about apple i did

Not expect apple to sell so many uh iphones in particular and i won't be surprised by ipad or the imax with more people almost being forced to either work from home or

Tutor their children from home so this this is how i see it so in terms of big tech stocks and i'm going to show you in a minute how they are weighted at the moment on the s p 500 because they make up a

Massive proportion of the stock market index we'll talk about that in just a minute but the massive positive here for the tech stocks is very very clear to me the massive

Positive is the fact that there has been an online revolution and what's happened with the pandemic is that has only accelerated significantly so that has greatly benefited amazon as

You would expect also apple in terms of device sales microsoft in terms of software etc and i i personally think google's revenue is going to bounce back so they are going to be reporting stronger

Ad revenue kind of growth because more and more people are on their devices so that's where you would want to advertise so this is a massive positive and there's no signs that that will

Discontinue my feeling has always been as we're reopening consumer behavior has changed for example let me ask you a question if you've been shopping online let's say for the first time for your

Groceries in the last few months how many of you have resorted a hundred percent to going back to your local super stores and supermarkets again how many of you have continued to actually purchase online because you've

Realized that it's a lot easier there's usually a lot more choices well sometimes it's actually more cost effective so it's actually cheaper so this is a massive positive for tech

Stocks now what are the headwinds so there's two that i see and one of them i was very surprised about when it comes to apple because my feeling with this has been

So you have all of these people unemployed and also although interest rates are very very low you're not going to get the same amount of borrowing i still think banks are going

To be quite difficult and also consumers are going to be more careful they're going to be saving a lot more than they are actually borrowing money so my feeling has always been good because especially apple devices a lot

Of people tend to purchase them on different kinds of payment plans and i know apple are trying to be more flexible in that regard and they had been in the last few months

So perhaps that boosted some of the revenue but remember the sales of iphones for example that will assume that they collect all of the payments that customers need to make so the big

Headwind for me was what i was expecting was when all of this hit i expected consumers not to be able to spend anywhere near what they were doing in 2019

However in that three four month period what has happened the governments have come in and the central banks have come in massively and they've given people all of these

Kind of payment holidays loan deferral holidays mortgage holidays and they've given free money so lots and lots of stimulus checks and other types of helicopter money in various western societies

So that's kind of plugged the gap for now but towards the second half of the year is that eventually going to happen are we eventually going to see consumers not spend money

And if they're not spending money it doesn't matter what the tech stocks are doing eventually they sell to businesses and consumers amazon does apple does etc so eventually those device sales will have to drop

However the what they're competing with is the positives so if tech stocks are literally the the way we're going to be living in the next few years we're going to be run

Literally our houses are going to be run by amazon echo and other google devices etc then are they going to get an ever increasing market share and will that percentage

Offset any reduction in consumer spending habits that's the big question and the other massive headwind here that i see for tech stocks is basically this some of you may have watched the antitrust hearing or heard about it this

Week this is huge if you get a chance to i would highly recommend just going on youtube and just typing in anti-trust hearing it was a very very long meeting and i didn't watch all of it but i

Watched a couple of good couple of hours i think it was about four hours in total and it's very interesting because congress were asking them difficult questions and basically trying to determine really

Look are they holding monopolies in various sectors and the assumption there is this generally can't be good for the wider economy because what happens with

Monopolies is eventually when you take out all of your competitors you can then start to raise prices and set them to basically what you want to to make as much profit as you want and there's an ever increasing market

Share and then nobody else can compete so that won't keep prices low and then these companies like facebook and amazon they keep buying up their competitors and that has definitely been happening i'm

Off the personal opinion they already have kind of a monopoly setup in the various sectors however because of this pressure now is there a chance that uh big tech stocks could be broken up or there could

Be some more new regulations come into play now this did happen with uh big companies in the past like a t and t but will it happen now who knows but

This potentially could be a headwind as well that's just something to be mindful of so we're gonna have a look at the apple uh stock chart as well in just a minute just to see where we

Are in terms of the uh trend but before we do that as well let me show you what these kind of sector weighting is now with these stocks so this is the big five now in 2020 so

You've got amazon microsoft apple uh google or alphabet and facebook can you see here what a massive percentage weighting they have on the market cap now although you can see this as okay

All of these stocks are very very strong that's great they're pushing up the stock market as compared to previously that's really really good but the problem with this is there's reduction in market breadth

And it's not always a good thing to have only a few stocks making such large moves in the stock market for example the movement you're seeing in those thursday evening and friday on the s p

Was mostly due to i in my opinion mostly due to these stocks for example apple was up over 10 the last time we actually saw these type of levels was actually in 1999 leading up to 2000 just before the dot-com

Bubble so you see what i mean now about headwinds so let's just discuss economic data very briefly and then we'll get on to the charts and by the way if you're enjoying the video please click the like button and

Subscribe to the channel if you're new i'm doing regular updates especially on the s p 500 and wider stock market indices if you click the bell icon you'll be notified

Anytime i release a new video so what do we see in the us in terms of data i mean there's too much to go through in this video but i want to concentrate on a couple of the important

Uh kind of numbers that we saw gdp as expected was was down a lot we we know that but what's what are we going to see for quarter three quarter four that will be very interesting to see but

Let's have a look at the trends of jobless claims so let's have a look at that one first and initial jobless claims you can see here it was drop and drop in all the way into uh later on in june

Then it kind of plateaued and then what's a little bit concerning is it's kind of spiking up the other way again nothing significant that you can say here but you also don't want a baseline here you want it to be

Returning back to these levels here you see these you know the 300 400 000 kind of numbers but it looks like that's far away yet so again the economy is not the stock market of course

But you could say the economy might lead the stock market or the stock market could be a forward indicator of where the economy might be in six to 12 months and these kind of indicators aren't great the other one i'll just

Touch on very briefly is real consumer spending this one not particularly helpful but we did see a big drop actually in uh july all the way down to minus 346 so let's

Get on to the uh stock market now so let me just remove these drawings first thing i want to show you here is and let's just get on to a four hourly chart i talked about the tech stocks

There there is a way to kind of visually represent that just to give you a better idea this was the move we've seen this year in 2020 so after that massive move down we've had a strong recovery back up but

This is the normal weighted s p 500 let me show you the one which is equal weighted where all of the stocks in the s p are kind of given equal value and i'll actually show you that side by side so you can see the

Comparison i'm just going to change this to the spx okay so this is the comparison and what you can see here is quite clearly you can see the late february march move

Down here but then in the recovery first of all you can see this 29th of april high notice we got a much deeper move down in may on the equal weighted so tech stocks weren't hit anywhere near as bad

During that correction and then we had this high on the 8th of june but then notice since then on the normal s p 500 we've had two higher highs but look how weak

The equal weighted smp is looking it's well below the highs we saw on the 8th of june so what's my point with all of this my point is just for you to note that especially on friday most stocks were

Actually down it was a much smaller percentage of stocks that were up but their movement is that much more significant on the s p 500 that's one thing for you to know and the other one

Is the fact that because now you can say apple's movement on the stock market is so key with regards to the wider index you have to consider the fact that if there was any massive downward move in these tech

Stocks that the whole stock market would suffer it doesn't matter if you're into growth stocks or value stocks or sector rotation etc so let's have a look at apple now apple has rallied way higher than i was expecting even though

Obviously tech stocks were benefiting from the lockdowns and the big question i have here is if we look at this entire structure up and we were to tentatively label this move the best fit would

Probably be something like this so this well did look like a fourth wave on a lot of different tech stocks now what does that mean that means we're in a final move up before we get some sort of

Usually quite a decent correction because we'll be correcting this entire move so if that's the case we would expect this final impulse to also break down into a smaller five wave

Move and i'm just going to drop onto an hourly chart here so what i can see from this low and we had a lot of volume at this slow as well which i'll show you in just a minute we saw either a five wave nearly completing or

There's a top of a three we're gonna have a bit of correction and one more leg up so this is one scenario and i think if this scenario holds out what we could see then

On monday or tuesday is we could see either a move down beginning early so in the monday trading session or we can get two three days of a bounce and a move back up

And then by wednesday or thursday that could be a top for apple now that would be a short-term top because this was a five-way move so we would expect a big correction so just zooming out here what i mean is

This whole entire impulse structure would need to correct downwards and if that did happen because of the waiting now i would expect if apple moved down

Significantly for the indices to also suffer so that's one possibility the other possibility which is very bullish i'll just discuss now let me just remove these drawings so the

Other possibility is that we're in a fifth wave but it becomes a massively extended fifth wave so this first move is just the first structure in this final tech boom which could last

The whole month of august and we get a massive rally in apple and i imagine the other tech stocks will follow so another 15 or 20 percent rise up and that will i think

Carry the stock market indices to new highs including the s p and possibly the dow jones as well so let's just get back on to the s p 500 and what i've done here also i've just overlaid the chart of apple

So you can see it following the s p 500 and the correlation between both which you can see is obviously very very strong and if you see any big s p corrections over the last two three years you'll see apple

Makes similar kind of corrections obviously the extent of the correction is different it's usually a lot more shallow for apple as compared to the s p but you can you can see my point here so the two scenarios

I'm looking at is there's massive euphoria in the tech stocks hopefully a lot of people will be buying them on monday or tuesday just at the point where they could be topping out off their first

Move up from march which we'll all need to correct that's one scenario the other is the month of august they're just beginning their final ascent up which could be another 20

Move which will carry all of the stock market indices up into bullish mode now another thing i want to show you is the difference between the nasdaq as compared to the dow jones because the dow jones has been very weak nasdaq has

Been very strong so i've got the nasdaq 100 futures here and i'm just going to compare the chart of the dow jones and one thing i want to point out here i'm just going to draw it on is we're

Seeing a lot of divergence between these indices so you can see the nasdaq continuing to make all-time highs but the tao just seems to be going in the opposite direction if you if you see these

Lower high peaks now what does that mean well all we can do again we can't predict the future but all we can do is look back through the last few years just to see if it was significant previously anytime

This did happen if you look at february we didn't really see that particularly both indices were making new highs and on the nasdaq compared to the dow jones if you go back to 1999 2000 you saw there that

It was a great example of where we had massive divergence we saw dow jones hit a high on the 14th of january after that high dow jones was actually rolling over from that high but nasa continued to make

Higher highs all the way up to the market top around 24th of march 2000 where the dow jones made a lower high and then both indices were weaker so what did we see in the s p on friday then well

In terms of candlesticks we saw a hanging man doji now sometimes when price is moving up and you see this kind of candle pattern with space uh

Usually below so almost like an island reversal that could be a sign of a change but not here because we've been moving sideways all week so that's not a significant

Point to know and it's worth pointing actually both thursday and friday we finish quite bullish towards the upper end of price range so we're now on the verge potentially of

A fine final breakout above 3300 so we're on the verge of finally doing that just dropping to an hourly chart and again because of the sideways movement we can't really look up momentum it's not helpful

At all here we just have to look at potential support and resistance zones which i did discuss during the week so the 3200 level we've already talked about is absolutely key here uh as is that high we printed on the

23rd of july so around the 3 2 eight zero level part i'm personally struggling with here is that high since the eighth of june so we had a

Three wave move down here from here this structure going sideways has been very very tricky but could this all have just been a larger fourth wave so are we seeing something like this it's possible

And that would fit in with what we're seeing in tech stocks perhaps one more move up before a larger correction of the entire move and remember the third can't be the shortest here when you look at

Kind of wave theory so we know we're only going to be able to get to just over all-time highs as a maximum before we see a bigger correction if that does play out so futures and monday's trading is key

For me because if we're gonna break out and we're gonna try and make it to all-time highs from here despite how how weak a lot of stocks are looking like for example

The ones we see on the dow jones then i would expect futures to break out convincingly and then rally from there the alternative is this is a one two so if we don't break out above 3280

Especially in futures trading and we begin to move down we get any other kind of bad news over the weekend then i'm looking at 3200 level and i would advise if you're trading this in

Any way you don't need to do anything yet because we're range bound so the trend is not clear right now but very likely this week that it will resolve itself so it's better to look

For a breakout and then look for a trading opportunity long or short and just zooming out again the two bearish counts i have first is that of a complex correction

Which is still tracing out so we could be ending pretty much anytime soon and that would mean a larger move down on the s p 500 the second one is a possibility

That this was all a three wave move but this is an ending uh diagonal c wave so this is why we're getting this overlap so on the spx you can just draw this upper trend line here now i mean i don't

Know exactly when we'll test that line again but probably it'll be on monday or tuesday's trading so if we hit that line and then price gets a bit of a strong reversal off it

That could suggest that this was a a combination of three wave moves up in an ending diagonal so that's still valid and just briefly let's touch on some other markets we've been discussing so oil bit of a stronger move on

Thursday going into friday so i still think we're going to get a larger correction in oil potentially dollar we had some strength and a bounce back we had a bit of a spike below this

Longer term trend line and a decent bounce back wait and see if this is something that's going to be a larger reversal if it is that's negative generally for the stock market the vix

Is still holding on this kind of normal well just above the normal territory so we'll see if there's any volatility breakout this week the bond market was looking very weak so we're now up

53 and again the way i would look at the bond market is this just given a sign as to what where the economy might be going so if we look at the 10-year minus the two-year spread so the move from the fifth of june here

This is all indicating that the yield curve is again let's say that's a normal yield curve is is getting flatter again if the difference between the 10 and the two is reducing and that's been

The predominant trend from the beginning of june finally a couple of the european stocks so let's just have a look at the uk so despite tech strength since that june

Move we're seeing you know quite quite weak kind of follow through downwards in the european stocks will we get a bounce back on monday or tuesday we'll wait and see or are we going to

Get followed through of that move and a stronger correction down so that's the ftse so not looking particularly good at the moment and actually it's the same thing on the dax as well the german stock market so

We had a high here on 21st of july and we had quite decent momentum and selling downwards so again is is there going to be a significant spike back or a con

Or a flag and a continuation of this move we'll wait and see but i'm sure you can see my point now about the divergence strong divergence now between different market indices so please let me know

What you think in the comment section below we've seen big moves on bitcoin at the moment as well so i'll do another update on that if you have a look through the channel i did do one last weekend

Where we had a bullish breakout if there any other areas you want me to cover again just comment below as well have a great rest of your weekend and i'll speak to you all again on monday thanks for listening

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