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Stocks Are Likely To Drop After Amazon’s Massive Guidance Miss

By Michael KramerStock MarketsJul 30, 2021 01:57AM ET
www.investing.com/analysis/stocks-are-likely-to-drop-after-amazons-massive-guidance-miss-200594792
Stocks Are Likely To Drop After Amazon’s Massive Guidance Miss
By Michael Kramer   |  Jul 30, 2021 01:57AM ET
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GDP had a big miss yesterday, coming in at 6.5%. Normally, that would be a great number, but when expectations were for 8.5%, that’s a huge miss. Pending home sales also came in weaker than expected, falling 1.9% for the month versus estimates for a gain of 0.3%—disappointing economic data across the board.

It didn’t stop the S&P 500 from rising because bad news is good news. Obviously, if the economy is weakening, the Fed can’t taper, right? Well, that’s not entirely true. The Fed can easily taper, the economy is still robust. The problem isn’t the economy; equity market valuations are too high to be supported by the weaker growth rates. Eventually, investors will realize that the Fed is about to embark on a tighter monetary policy, just as economic growth is normalizing to lower growth rates, while valuations are at historically very high levels.

S&P 500 

The S&P 500 (NYSE:SPY) hit resistance at the trend line and failed to hold it and not make a closing high. The momentum trends are still diverging, with the Advance/decline, RSI, and MACD all trending lower. At this point, I think we test the 50-day moving average at a minimum.

S&P 500 Equal Weight

Meanwhile, the equal-weight S&P 500® Equal Weight ETF (NYSE:RSP) tried to break out. Technically, it had a new closing high, but this is just too close to call. We need confirmation of a breakout.

RSP Daily Chart
RSP Daily Chart

Amazon

Amazon (NASDAQ:AMZN) reported results, with earnings beating but missing on revenue by almost 2%. On top of that, the company guided third-quarter revenue to $109 billion at the midpoint of the range vs. estimates of nearly $119 billion. AWS had revenue of $14.8 billion, which came in line with the high end of estimates. This is a big problem, when the street thought Amazon was going to grow revenue by almost 24% in the third quarter and guidance is for growth of around 14%, after growing by 27% in the second quarter. This will not be a one-day drop.

Anyway, we knew bad things tend to happen when the stock RSI reaches a level near 80. The next level of support is around 3150.

Amazon Inc Daily Chart
Amazon Inc Daily Chart

Facebook

Facebook (NASDAQ:FB) was down 5% following its results yesterday.The stock has a gap that needs to be filled at $355 which should offer some support.

Facebook Inc Daily Chart
Facebook Inc Daily Chart

Stocks Are Likely To Drop After Amazon’s Massive Guidance Miss
 

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Stocks Are Likely To Drop After Amazon’s Massive Guidance Miss

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Comments (6)
Adil Khan
Adil Khan Jul 31, 2021 10:48PM ET
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You are keep saying market gonna tank for last several years .
Antonio Fernanda
Antonio Fernanda Jul 30, 2021 4:11AM ET
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There too many ways one can earn in the online market
Tom Jones
Tom Jones Jul 30, 2021 3:44AM ET
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I like that you’re keeping us honest by presenting the bear case. 10% would be a disaster, but due to an ETF-centric market, this could occur with just a few tech giants tanking. Gotta wonder, though, how many opportunities I would have missed if I had halved my equity exposure when you wrote your first chicken little piece. Yourd getting much closer to being right, but not sure for how long given that other asset classes are either offering awful returns or are illiquid.
Paul Smith
Paul Smith Jul 30, 2021 3:03AM ET
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Yes make sense, market needs 10% correction at least
Semih Unalan
Semih Unalan Jul 30, 2021 2:29AM ET
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Bla bla bla, how many more times do you need to be wrong to reconsider your analyses?
Antonio Fernanda
Antonio Fernanda Jul 30, 2021 2:29AM ET
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Was the matter here, is the analysis not correct?
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Jul 30, 2021 2:22AM ET
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Stocks are suffering from constipation, to get bigger chunky lumpy droppings in stocks you have to be patient, don't wipe to get out too soon
 
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