This week is about to wrap up.
It began with a Monday market dump and then a Tuesday rally started that caused everyone to forget about the bad Monday. But don’t forget that Monday dump happened following a deterioration of the internals inside the stock market. That often serves as a signal that you are in a topping phase or near the end of a rally.
So, we have to still be careful.
There are five key stocks I am watching to see what direction the market will take in August. All five of these stocks report earnings next week, all five are outperforming the S&P 500, and all five are among the biggest market cap stocks in it and the Nasdaq, so they have a big influence on the market action. If they report earnings and peak out next week that will be a big warning sign for August.
These stocks are AAPL, MSFT, AMZN, GOOG, and FB. Here are all of them in this chart and you may notice something big with them, as I’m comparing their action with the widely popular ARKK ETF, which holds many of the fad favorite wonder stocks that so many Robinhood traders now own.
Here is an hourly chart of all of this for the past 30 days.
Notice that all of these stocks are trading above where the ARKK ETF is over the past 30 days. That is because they are leading the market. They are not only doing that they are helping the stock market go up this week, because they so heavily weight the S&P 500 and Nasdaq 100. Traders are buying these stocks AHEAD of their earnings reports next week.
If they report earnings next week and finish the week strong that will be a great sign that the stock market will keep going up, but if they don’t and fade that will be a giant red flag. Traders often buy stocks into earnings and then sell on the news as the novices chase gap up openings.
I’ll be watching these stocks next week. You should too.
As for gold, it’s still going through a stabilization phase this month, much like it did in March. This is one reason why I remain invested in gold, silver, and mining stocks. It may also be why my top stock pick of the month is up for the month, while many fad stocks got smashed this Monday. David Skarica did a video update on the stock yesterday you can find here.
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-Mike
