Yesterday the S&P 500 and DOW gapped up off of the open and rallied for most of the day until they reversed on the close and finished in the red. Part of the selling was driven by big reversals in several big cap tech stocks with most prominent action being driven in Tesla (NASDAQ: TSLA) as you can see from this chart.
A key reversal day happens when a stock has a huge rally and then a final day in which it is up huge only to close in the red. This defines the action in TSLA as yesterday it was up 16% at one point in the day only to finish down 3%.
And this action has happened after TSLA’s momo stock run that has attracted many traders into the stock – even small account Robinhood traders who have pushed the stock up towards the top of Robinhood’s top 100 owned stocks. Most stocks in the market are simply sagging since the first of June, because 20% of the US companies listed in the stock market are now simply zombie companies – they have so much debt that all they can do is try to finance their debts with their revenue streams. They can no longer innovate or create. And this makes the few stocks like TSLA that are vastly outperforming the rest of the market stand out.
But reversal days signal a loss of momentum so now TSLA is going to at best drift sideways for weeks. More important is the action in the S&P 500 yesterday as it’s key 3200 resistance level held again.
The S&P 500 now has support in the 3028-3038 area, which marks the confluence of its 50-day, 150-day, and 200-day moving averages and at 3200 and its June high. Resistance is holding for now.
I talked last week with Jordon Roy-Byrne about gold and its 1800 level. If you missed that interview you can find it here.
I also posted a new interview with Carmine Savastano about zombie companies and what he sees as the mask of morality many corporations are using now to keep people’s attention in these times. You can find that podcast here.
-Mike
