NFLX Plunges in Fulfillment of Projected 3 – 6 Month Peak; Canary in Coal Mine?
NFLX Plunges in Fulfillment of Projected 3 – 6 Month Peak; Canary in Coal Mine?
07/18/18 Weekly Re-Lay Alert: Stock Indices remain divergent with the Nasdaq 100 remaining strong and in an all-out uptrend as the S+P 500 nears its secondary highs of mid-March and the DJIA sets progressively lower highs. That corroborates the intra-year trends in the DJIA vs. NQ-100…
The DJIA turned its intra-year trend down in early-Feb. and has vacillated between down and down/neutral since early-Feb.
The NQ-100, in stark contrast, tested and held intra-year trend support in early-Feb. and then turned its intra-year trend up in early-March. It has vacillated between up and up/neutral since early-March.
Similarly, the DJIA turned its weekly uptrend to neutral in early-Feb. and has remained in that structure ever since. In contrast, the NQ-100 re-entered its weekly uptrend in Feb., neutralized it in March and then re-entered it in May. It remains positive…
In light of Netflix’ recent quarterly ‘miss’, another aspect of recent analysis is worth repeating and updating. The July 14, 2018 Weekly Re-Lay stated:
“In most cases, the DJIA is the least diverse and least representative of the overall market. With its composition of only 30 stocks, frequently re-aligned to bring in positive stocks and dump negative ones, it can give a rather skewed perspective.
However, the Nasdaq 100 and S+P 500 have become far less diverse, with close to 80% of the NQ-100’s gains coming from three stocks in 2018 (AMZN, NFLX & MSFT). The same stocks account for 70+% of the S+P 500’s gains, according to CNBC and other sources. Add in GOOGL, AAPL & FB and you have almost all of the NQ-100’s gains.
After moving parabolic in 2018, NFLX has shown some signs of vulnerability after completing back-to-back ~150.0 rallies since Dec. 2017. In the past, I have discussed certain stocks acting as a proxy for the overall market. NFLX could be the canary in the coal mine…”
Netflix has initially validated that potential, plummeting ~60 points in less than 24 hours. It did drop right to its initial support (a 50% retracement of the 180 – 420 advance) but has given multiple closes below 380.0 – a key level of 2 – 4 week support.
With stocks like MSFT attacking, and AMZN nearing, related upside targets, the action of NFLX could be revealing over the coming days and weeks.
And to reiterate, these stocks are merely mentioned as a type of proxy for the overall market at a very pivotal time in this bull market (it is not to initiate coverage of them on a regular basis). The fact they surged to their weekly LHRs on July 13 also argues for a 1 – 2 month peak in the second half of July.”
Stocks are steadily tracing out a topping process in 2018, expected to roll over in 3Q 2018 and then turn decidedly negative in 4Q 2018. NFLX appears to be the first sign of trouble, having fulfilled major upside objectives and signaling a likely 3 – 6 month (or longer) peak. Look for other ‘proxy stocks’ to follow in the coming month(s).
Focus remains on pivotal cycles in late-Nov./early-Dec. – after which equities should enter their most bearish phase (assuming they see an initial decline before a rebound into a secondary high by early-Dec.). 22,100/DJIA is a primary downside target for 2018 and could be hit before or after the late-Nov./early-Dec. (secondary) peak. 2280 – 2325/SPX & 5575 – 5750/NQ are corresponding 2018 downside targets.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.