Blowout Earnings Report in WMT Benefits its Competition

There were several market messages in today’s price action. Starting from the top…

The SPY finally closed at an all-time higha nd, after what seems like weeks of anticipating this moment, it closed over the level by fractions of a percent and a doji pattern. This follows a doji pattern yesterday.

My emphasis on the doji is because a doji pattern is defined by candlestick charts as meaning “indecision.” Two days of indecision at all-time highs often leads to expansion. I’m not suggesting this a top, especially with the strength of the QQQ, but if the SPY trades below today’s low tomorrow, remember the double dojis. Bulls should do the same if the SPY breaks higher.

The second market message was in retail. WMT, HD and KSS all reported better-than-expected earnings, then all sold off.

“Good news bad action” is a bad omen for stocks at highs. As a result, we should watch WMT and HD closely if they begin to correct. KSS, on the other hand, is stuck in a base, so its selloff is less telling if it declines and more encouraging if it reverses higher in the coming days.

But that only half the retail story. The more interesting (and the trading opportunity) half is that, while WMT’s blowout performance didn’t boost its stock today, it caused another retail stock to break out to the upside!

If you took note of today’s image, then you know I’m referring to AMZN, which exploded out of a month-long consolidation on big volume to an all-time closing high. It makes sense that, if WMT’s online business is doing well, then AMZN’s is likely just as well if not better.

If you like to trade hot stocks that have big ranges, AMZN should now be on your watchlist. Today, it was just like TSLA from yesterday – the 5-minute OR breakout. Tomorrow look for a 30-minute OR reversal if it pulls back.

Finally, the SMH surprised me today. I was so focused on TSLA, AMZN and and Bitcoin (a story for another day) to notice until the close that, while the QQQ was advancing 1% out to new highs, sister Semi (SMH) was weak enough to close down and below its prior day low!

What’s going on? Are the Semi’s tired?

NVDA reports earnings tomorrow, so that could change the SMH chart substantially. If history is any guide, the NVDA news will probably be bullish in the headlines, but you know from today’s retail message that there’s more to look out for.

I’ll be looking for good news and good action. Bad news would likely be very uncomfortable for the market. Good news and bad action would be better, but not good.

While that may sound like a bearish conclusion, I’m not bearish. I’m just just not as complacent as the VXX.

Best wishes for your trading,

Geoff Bysshe


(Geoff is filling for Mish until August 31st)

  • S&P 500 (SPY): New all-time closing high (with a doji). Watch 330 as important support
  • Russell 2000 (IWM): Weak all day. Key level to break above is 158, then 160 is resistance area. Today’s low sits right below the 10-DMA and 153 is key support.
  • Dow (DIA): Weak day, found support at 10-DMA. 276.50 is pivotal support
  • Nasdaq (QQQ): Strong move out of 7-day range. 260 is key support level and a trendline
  • TLT (iShares 20+ Year Treasuries): Closed over prior day high. Resistance area is at 166. 162 next big support