The stock market sold off hard on Thursday afternoon as we went into the long weekend. The S&P 500 index dropped by 1.2%, while the Invesco QQQ Trust ETF (NASDAQ:QQQ) fell by more than 2%.
The declines on Friday resulted in the gains from Thursday disappearing entirely.
1. NASDAQ
The NASDAQ futures may give the best representation of where things stand in the market, currently sitting on support at 13,890. A break of that support level sets up a more significant drop in the market, with the potential to decline to 13,470 in the days ahead.
But this is a tricky period for the market because post options expiration, the market tends to see follow through the first two days of the week and then reverse by mid-week. That would indicate that the market moves lower to start the week and then reverses by the week’s end.
I suspect that the market tries to test that 13,470 level early in the week and then moves back up to resistance at 13,890 by the week’s end.
2. Real Yields
The other problem for the NASDAQ is that the iShares TIPS Bond ETF (NYSE:TIP) keeps dropping, and as long as the TIP ETF drops, it means real yields are rising, which is terrible news for the NASDAQ and many of the technology stocks in it.
The next level I am looking at is $120, but we did see some big options bets about two weeks ago that suggest it goes back to $117, which indicates positive real rates on the 10-year TIP.
3. Advanced Micro Devices
Advanced Micro Devices Inc (NASDAQ:AMD) was very weak again on Friday, making a new closing low. The chart looks very weak, and the shares are getting to a point where we have to start wondering if the market sees an earnings downgrade cycle coming.
The PE ratio at 19.5 is at its lowest level in some time, and that can only make one believe that investors are getting worried about current earnings estimates being too high and the potential for them to drop. The next logical place for the stock to find a bounce comes around $89.5.
4. Alphabet
Alphabet (NASDAQ:GOOGL) is at a critical spot, as it sits on support at around $2,500. The stock has tested this level multiple times, but I’m not sure it can hold much longer, with this being its 6th such attempt.
If it breaks this time, it starts a drop to $2,430, and probably further to $2,260.
5. Netflix
Netflix (NASDAQ:NFLX) will report results on Tuesday after the close of trading. I noted during the week that expectations for results have dropped significantly for the first quarter.
With the second quarter historically the weakest quarter for Netflix, the chances are rising that Netflix may see lower prices following results.
The chart is not bullish, and the shares are approaching their lows, last seen in mid-March. A drop below $330 sends the shares to $300.
6. JPMorgan
JPMorgan Chase & Co (NYSE:JPM) was very weak following disappointing results. Big bearish bets were placed on the stock that suggests further downside risk, and the chart shows there is no support until it gets to $122.
