The following is just a small excerpt from last Sunday, April 20th, in my most recent Weekly Strategy Session (please click on that hyperlink for details about trying it out). which I published for members and 12631 subscribers.
Even if the S&P 500 and Dow Jones Industrial Average remain resilient, perhaps marginally printing fresh new highs, and do not immediately follow the Nasdaq and Russell lower to their own respective 200-day moving averages, it is likely that the marquee growth stocks housed in the Nasdaq and Russell have already peaked for this multi-year bull run. As a result, rallies in the prominent marquee names, such as AMZN FB GOOG NFLX PCLN, biotechs, and other growth leaders, should be sold.
As evidence to support the above assertion, consider the weekly charts of both the Nasdaq and Russell. As I noted last weekend, breaks in very steep trends (light blue channel lines on each chart, dating back to November 2012) are important and command your respect. Last week, we saw both indices reverse higher off their lower weekly Bollinger Bands, as well as the 50-period weekly moving averages (dark blue line). That initial bounce is almost to be expected, barring an outright crash. Now, again, comes the hard part.
The fact remains that these very steep, long-term trends are broken and even a temporary bounce back inside these channels is not likely to immediately heal all of the high sell volume damaged sustained in leaders in recent weeks. Now, more than ever, traders should know their precise timeframes for all trades and acknowledge the underwhelming performance even in the broad market bounce late-last week.
Put another way, rallies remain suspect.
Probing deeper into the thesis that growth stocks have largely peaked for this bull, consider two leaders with earnings coming up this week: AMZN FB. Both stocks have room for another exuberant rally after earnings, but that could also be within the context of still-damaged charts.
On their daily timeframes, note that the recent bouts of selling have come after steep, multi-quarter bull runs higher. Similar comments apply to biotechs and other marquee leaders over the past few years.
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