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Amazon Weighs on Consumer Cyclicals

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Stocks in general are undergoing some profit-taking today. And consumer cyclicals are one of the day's weakest groups. A big reason for that is today's big drop in Amazon.com (AMZN). Chart 1 shows that influential stock dropping -7% today on last evening's reported drop in first quarter earnings. And it's now testing initial chart support along its late-April lows near 2300. If that doesn't hold, more substantial support is likely along its February peak at 2185. The upper box shows its 14-day RSI line starting to weaken from overbought territory over 70. And its daily MACD lines (middle box) are in danger of turning negative for the first time since mid-March. That raises the possibility of more profit-taking to come. Because of its size, what AMZN does has a big influence on the direction of consumer cyclicals which are trading lower today.

Chart 1

The daily bars in Chart 2 show the Consumer Discretionary Sector SPDR (XLY) pulling back sharply from its 200-day moving average. Some of its biggest losers include cruise lines, hotels, and gaming stocks which have rebounded over the past week. Today's drop in Amazon, however, is also a big reason for the pullback. That's because that stock accounts for more than quarter of the XLY weightings. So what AMZN does has a big influence on the XLY. Which today is negative.

Chart 2

Semiconductor stocks are also coming under selling pressure today. Chart 3 shows the PHLX Semiconductor iShares (SOXX) down nearly -4% today and dangerously close to falling below its 200-day line. One of its biggest losers is Lam Research (LRCX). Chart 4 shows that chip stock already falling below its 200-day average to the lowest level in nearly a month. Selling in chip stocks may also start to weigh on the tech sector and Nasdaq which are still trading above their 200-day lines. With help from some of the biggest tech stocks.

Chart 3

Chart 4


Editor's Note: This is an excerpt of an article that was originally published in John Murphy's Market Message on Friday, May 1st at 11:12am ET. Click here to read the full article, which includes Charts 5-6 and a discussion of the Nasdaq Composite Index.

John Murphy
About the author: is the Chief Technical Analyst at StockCharts.com, a renowned author in the investment field and a former technical analyst for CNBC, and is considered the father of inter-market technical analysis. With over 40 years of market experience, he is the author of numerous popular works including “Technical Analysis of the Financial Markets” and “Trading with Intermarket Analysis”. Before joining StockCharts, John was the technical analyst for CNBC-TV for seven years on the popular show Tech Talk, and has authored three best-selling books on the subject: Technical Analysis of the Financial Markets, Trading with Intermarket Analysis and The Visual Investor. Learn More
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