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The Not-Good-Enough Earnings Season

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Out of the February correction lows, the strongest charts were in the Nasdaq 100 (NDX), with stocks like Amazon (AMZN - Free Report) and Alphabet (GOOGL - Free Report) leading the charge to new highs.

In the video that accompanies this article, I show charts of the NDX and the Philly Semiconductor Index (SOX) to point out their bullish structure with higher highs and higher lows. Even trade war fears couldn’t put a lasting dent in semis like NVIDIA (NVDA - Free Report) and Lam Research (LRCX - Free Report) in March.

But the SOX recently gave up its higher low and the overall market looks weak as we head into the heart of earnings season. To wit, the strong quarterly results of Caterpillar (CAT - Free Report) did little to improve the technical picture for the Industrial sector, whose chart looks like it’s ready to break down below its 200-day moving average.

Does Peak Growth Spell the End of the Bull Market?

In an April 13 article, I described the dilemma that professional investors find themselves in with tariff uncertainty and the possibility that extraordinary earnings growth could soon be seen only in the rearview mirror.

That article, Growth Peak on the Horizon, showed how Technology earnings have led the market higher, but that soon the “comps” were going to get much tougher. I also created some charts on “FRED,” the Federal Reserve Economic Database website, to show how quiet and steady GDP has been – and why that “Plow Horse” pace and slope is a good thing.

I update those earnings graphs in the video above and describe why I think that good buying opportunities are coming up as more charts break down and create a new capitulation sell-off by more worried – and just plain exhausted – bulls.

Thou Shall Not Pass 2400

I don’t know if the correction lows near S&P 2550 get taken out, but I would be a buyer looking to scale-in before then and anywhere below 2500. That’s because, as I’ve been telling my followers since February, my technical work tells me S&P 2400 should hold.

That view is based on 2487 being the 50% retracement from the summer 2016 breakout above 2100 to the highs at 2873. And 2394 would be the 62% retracement.

My focus on 2400 is also based on some fundamental math that likes the valuation when $155 in S&P EPS are trading for 15.5 times. Even though I’ve held these views all year, I still look at the data and crunch the numbers every week to make sure they add up. Here was my update last week…

Has the Stock Market Topped Already?

In the video that accompanies this article, I also share an important truth of technical analysis about drawing straight lines on price charts. It can save you a lot of time and money if you can see the “naked emperor” (or sacred cow, if you prefer) that most are blind to. Here’s that link if you want to go there “straight” away…

Trend Lines Are Mathematically Absurd

Cooker’s Bottom Line: Many charts look terrible in the short-term and should lead to some terrific panic flushes. Have cash ready to buy these next dips because new highs are coming this year.

Disclosure: I own shares of NVDA and LRCX for the Zacks TAZR Trader portfolio.

Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader service. Click Follow Author above to receive his latest stock research and macro analysis.

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