Is a Downtrend at Our Doorstep?

Tradenet Weekly Report 17-21.4.2017 Is a Downtrend at Our Doorstep? [Download full Report]( Indexes closed off on the week by over 1% - and it seems like the bears are becoming more and more vocal! The long-lived rally in tech stocks will be put to the test this week with Netflix (NFLX) which kicks off the earnings season for the sector, responsible in its own right for over one-fifth of the stocks on U.S. exchanges. A surge in the prices of Apple (AAPL) and Facebook (FB) and other Silicon Valley heavyweights have propped up the tech sector by 10% year-to-date, over double the more meager S&P 500 yield of 4%. For the sake of comparison, the market cap – on aggregate – for the tech sector, comes to $4.4 trillion, 30% higher than the next largest sector, i.e. Financials. The next big test for these companies will be whether they succeed in recording strong enough growth to justify these fat gains! Take for example, Netflix (NFLX), the online video streaming platform which stands to report on Monday after closing, the company expected by analysts to increase its earnings 5-fold. The market's pricing of the stock, which has risen 43% over the last 6 months and which is now traded at a high forward PE of 109, seems to be more based on the sentiment at play rather than sheer fundamentals. That being the case, investors' response to the numbers released by NFLX is likely to foretell a lot of what's going to play out in the coming earnings season. If a slight miss on the downside causes the stock to plunge by 15%, for example, that would signal two things: that current price levels are too high, and that secondly, the market is only going to remunerate the stocks with the best results. Negative momentum has been rather rare in the current market, but the bears have finally succeeded now in recording two consecutive negative trading days. On Wednesday of last week, the S&P 500 closed for the first time since the presidential elections beneath the 50 period EMA. The NASDAQ is still the best performing of the large market indexes, but weakness in big cap stocks like Tesla (TSLA) and Amazon (AMZN) is beginning to take its toll. Large-cap, high beta stocks have been the market's stronghold for some time now, and so weakness on that frontier shows that the bulls are losing some of their grasp, i.e. their confidence is waning. Small-cap stocks have been beleaguered by problems for some time now, about 40% of them already trading beneath their respective 200 period EMAs, even though indexes are nowhere near these levels. In other words, we're getting a clear indication that that we're in a narrow market, the fact that only numbered stocks have participated in the recent rally becoming all the more significant. All of the indexes are still traded above their March lows. These lows constitute key levels, and many a technical analyst are looking to these levels for guidance. Until these levels are broken down, with support falling by the wayside, we won't be able to decisively declare that we're in the midst of a full-fledged downtrend. With that said, even if we don't yet have a downturn in our midst, the fact that indexes haven't succeeded in producing a new high since March 1st, along with other risk factors, compels investors to exercise added caution. For a long time, now, the market has made short shrift of negative news on every level, though, now, as we've begun to see negative movement to some degree, there's deep-seeded concern that the weakness is rooted in Trump. It's easy to argue that the lack of progress on the fiscal front, coupled with a more aggressive foreign policy posture, constitute a market concern. There's really no way to know when the news will start mattering, and at that point, it might be too late to respond accordingly – and that's something worthy of reflection! We're at the onset of the earnings season and before you know it, we're going to start hearing the idiom, "Sell in May and Run Away!" It is in fact true that seasonality will turn against the market's favor, bears certainly adding that to their selling points. Is the market on the verge of a downtrend? It could be – and it could also not be! We have no choice but to expect the worst and hope for the best. This market has succeeded in slinking past so many potential disasters so many times that, mouths agape, we have to wonder whether it can pull it off again! Bears have had their fair share of chances, but until now, they haven't been able to recruit enough naysayers. With that said, the new week upon us, they've got the upper hand! Weekly Summary: Stock indexes ended off, the Dow Jones slipping 1.01%, the S&P 500 recording losses of 1.24%, and the NASDAQ shedding 1.24%. Have a great trading week! --------------------------------------------------------------- [Download full Report]( for any further information, please do not hesitate to contact us at: support@tradenet.co.uk --------------------------------------------------------------- This e-mail was sent to {EMAIL} by support@tradenet.co.uk. ., ., ., . If you no longer wish to receive commercial e-mail messages from support@tradenet.co.uk, please select the following link: [Remove](.