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[3 Must-See Charts] The End of the FANGs?

Earnings season has delivered more than its fair share of market-moving moments so far this week.

Investors stayed glued to their screens yesterday afternoon as Amazon.com (NASDAQ:AMZN) reported a whopping $2 billion in profit during the second quarter, the company’s biggest haul ever. Shares spiked on the news after hours. They’re set to open higher by almost 5% this morning.

Meanwhile, one of Amazon’s FANG brethren is feeling the heat. Facebook Inc. (NASDAQ:FB) shares are reeling after a small earnings miss, followed by what many are calling a “disastrous” conference call.

Are two of the market’s most recognizable names about to go their separate ways and end the FANG meme as we know it?

Let go to the charts to find out…

1. Facebook’s earnings flop

Facebook shares finished lower by a staggering 18% yesterday.

The market’s top social media stock took its first hit when it released numbers that were slightly below analyst expectations.

But the stock accelerated its decline during the ensuing conference call, when Facebook CFO Dave Wehner “dropped one bombshell after another, rattling investors and raising red flags about whether Facebook’s powerful moneymaking machine is starting to sputter,” the Wall Street Journal reports.

Fb

Facebook management offered plenty of excuses. But none of them stuck. For analysts and investors, it was clear that Facebook’s soft guidance for the remainder of the year was going to be an issue. As far as the market is concerned, Facebook now has a growth problem. That’s a major red flag — especially during a roaring bull market as most companies deal with the weight of high earnings expectations.

As the dust clears, Facebook shares are right back where they were in early May as the company was recovering from its data breach scandal. That’s bad news for anyone who bought shares this week looking for an earnings pop, of course.

We’ll have to see if the stock can put in a new base at these levels. So far, the Facebook fiasco hasn’t dragged down the entire tech sector. That’s good news for the bulls who are just looking to get through the week without another high-profile earnings flop.

2. Is the trade war over?

Trade war rhetoric has fallen from the front page as an exciting earnings season has captivated investors.

But what about the blue-chip industrial stocks that have suffered the most from the tariff talk?

As it turns out, these stocks are beginning to get their collective act together…

Industrials

The Dow Jones Industrial Average is now outperforming the Nasdaq Composite during the month of July. The Nasdaq boasted a commanding lead until this week when the Dow surged higher.

As of yesterday’s close, the Dow is up almost 5.2% on the month, while the Nasdaq has risen 4.5%. Of course, Facebook’s performance dragged the tech-heavy Nasdaq down 1% on Thursday, helping the Dow take the lead as it finished the day with a small gain.

Will traders ditch their red-hot tech shares and finally pivot to the forgotten blue chips as August trading approaches? We’ll have to wait and see…

3. An “old bull” can still run

In just a few weeks, the financial media is going to bombard you with news about how the current bull market is about to take over as the longest in modern history, topping the 90s expansion that lasted almost a decade.

Here’s a chart that’s been making the rounds this week:

Industrials

[Click to Enlarge]

What they probably won’t tell you is that the post-crisis run we’ve enjoyed since 2009 has had more than its fair share of fits and starts, including a 19% drawdown in 2011 during the Eurozone debt crisis and the quickest double-digit correction of all time just this year.

Remember, the line always looks smoother when you zoom out. In reality, the path higher has been anything but an easy ride…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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