[3 Must-See Charts] Stocks on the Brink

The stock market is experiencing a shortage of enthusiastic buyers.

That’s a nice way of saying the gains we enjoyed earlier this week have completely evaporated…

The major averages endured another rough trading session yesterday. The Dow Jones Industrial Average slid more than 300 points, while the tech-heavy Nasdaq Composite dropped more than 2% by the closing bell. Our Turnaround Tuesday gains are gone as the averages slide back to breakeven on the week.

Is the market headed for more trouble?

Let’s go to the charts to find out…

1. Testing the lows?

The S&P 500 dropped more than 1.4% during Thursday’s session to close near its weekly lows. The S&P is now down 5% this month and rests dead on its 200-day moving average, while the Nasdaq Composite is lower by 7% and below its 200-day.

SPX

You might have noticed there’s been a lot of talk about the 200-day moving average these days. While the 200-day gives us information on the market’s primary trend, I do not use it as a trading signal. It isn’t a magical line that that tells us when we should be long or short. That would be too easy…

If the averages do fall below their respective 200-day moving averages, we can expect more volatile trading conditions going forward, with a greater chance of washout moves.

So far, Tuesday’s surge is the market’s only positive day the S&P has posted this week. The big volume continues to come in on down days, suggesting that we could test last week’s lows before experiencing a meaningful bounce.

2. eBay vs. Amazon

eBay Inc. (NASDAQ:EBAY) is having a bad week. The stock continues to push toward new 52-week lows as a fresh analyst downgrade and trade war worries weigh on shares.

“Trump’s order that the U.S. Postal Service withdraw from an obscure 192-nation postal treaty threatens to hit American shoppers who have grown used to bargains on platforms such as EBay Inc. and Amazon.com Inc.,” Bloomberg reports. “Because of the postal treaty, shipping the goods directly to consumers was relatively affordable. When the U.S. pulls out, thousands of listings from China-based companies hawking dirt-cheap consumer goods will likely disappear.”

The end of Chinese bargains isn’t eBay’s only headwind. The company is also reigniting its feud with Amazon, accusing Bezos & Co. of attempting to illegally poach sellers from its platform in a lawsuit filed this week.

But a quick glance at the charts shows the clear winner of this online retail battle:

AMZN

Amazon shares are up more than 50% year-to-date, while eBay stock is down double-digits. An investment in Amazon at the beginning of 2015 would have returned almost 500%. eBay shares are up just 33% over the same timeframe.

3. King Zuck is under attack!

The eBay vs. Amazon feud isn’t the only drama we’re following.

Facebook Inc. (NASDAQ:FB) investors are stirring up trouble this week as activists step up their attempts to oust Mark Zuckerberg as company chair (he currently serves as chairman and CEO).

“New York City Comptroller Scott Stringer, Illinois State Treasurer Michael Frerichs, Rhode Island State Treasurer Seth Magaziner, and Pennsylvania State Treasurer Joe Torsella are joining forces to pile the pressure on Zuckerberg,” Business Insider reports. “They have put their names to a proposal, originally filed by the activist investor Trillium Asset Management, demanding that Facebook appoint an independent chairman.”

Of course, no one would care about Zuck’s iron grip if it weren’t for the fact that the stock is reeling right now. Facebook shares continue to flirt with their 2018 lows this week.

FB

Facebook’s troubles intensified following a disastrous earnings call in late July. Management offered plenty of excuses for lackluster results. 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. Now that tech stocks are under pressure, Zuckerberg needs to put up or shut up — or he’ll continue to feel the wrath of angry investors.

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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