Chart Advisor: Amazon Can’t Deliver – Stocks rally to finish the week, but Amazon shares tumble on its latest earnings.

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

1/ Amazon Can’t Deliver

2/ Insurance Claims a Leadership Role

3/ Semiconductors at Summer Lows

4/ One For the Bulls

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1/ Amazon Can’t Deliver

In the latest earnings news, two of the market’s largest and most important stocks reported their third-quarter results last night. While Apple (AAPL) rallied as it beat estimates on the top and bottom lines, Amazon (AMZN) opened the day with a big gap lower as investors were disappointed in from the ecommerce giant’s latest earnings.

While AMZN recovered some of its losses from earlier in the session to close near the highs of the day, the stock finds itself in uncertain territory as it tests a vital support level.

Source: All Star Charts, with data provided by Optuma

Yesterday, we discussed Meta Platforms, and how it’s not unusual to see large gaps form at key polarity levels in reaction to earnings reports. We’re seeing the same today from AMZN.

Instead of the gap occurring at the 2018 lows like it did for META, sellers knocked down AMZN right at its 2018 highs. This level also coincides with the 2019 highs and summer lows, as resistance turned into support here back in May. As long as AMZN is below this key level near $100, the path of least resistance could be lower.

2/ Insurance Claims a Leadership Role

One facet about relative strength is that the stocks and indexes that hold up best during bear markets tend to be among the first to make new highs when the selling pressure subsides.

The insurance industry provides a great example. The chart below graphs the Equal Weight SPDR Insurance ETF (KIE), which just closed at its highest level since April:

Source: All Star Charts, with data provided by Optuma

After rallying 17% over the past month, the ETF is only about 3% off of fresh all-time highs. Not many groups can say that right now, so this chart stands out as a leadership area.

Notice the relative strength from KIE throughout the year as buyers have continued to defend the breakdown level at the pivot lows from 2021. Today, we received confirmation of the failed head and shoulders topping formation, as prices closed above the highs of the right shoulder. This group could continue to outperform in the near future.

3/ Semiconductors at Summer Lows

Technology stocks led the way higher today, as many individual names and subsectors were able to reclaim their summer lows.

However, one group that has not yet recovered its former support level is semiconductors. Here’s a look at the PHLX Semiconductor Index (SOX):

Source: All Star Charts, with data provided by Optuma

As you can see, this level not only represents the pivot lows from July, but also coincides with the 161.8% Fibonacci extension of the March 2020 drawdown. Seeing this crucial index make it back above this key polarity zone could be a big development for the bulls. This may not be easy. SOX is in a clear downtrend as evidenced by its downward-sloping 200-day moving average (MA) and bearish momentum regime.

4/ One For the Bulls

The copper-to-gold ratio just broke to its highest level in four months. This marks a significant turnaround for a critical risk ratio that has been under pressure since June.

When copper outperforms gold, the line on the chart moves higher as investors reach for the more economically-sensitive “Dr. Copper.”

Source: All Star Charts, with data provided by Optuma

This week’s action bodes well for cyclical value sectors of the market and risk assets in general.

Fresh multi-month highs for this ratio indicate a burgeoning risk appetite. Stock market bulls would like to see this ratio catch higher as the major U.S. indexes carve out tradable lows.

Originally posted 28th October, 2022

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