U.S. equities are suffering a large intra-day reversal on Wednesday, pushing the major averages in to the red amid a rare bout of selling pressure.
The catalyst?
A worsening selloff in the U.S. dollar, which was started by niggling concerns about the national debt, a looming budget/debt ceiling/immigration showdown in February and trade provocations by the Trump Administration. The slide accelerated this morning after Treasury Secretary Mnuchin said the level of the dollar was not a concern and that a weaker currency was good for trade.
Other issues include growing chatter about a large pension equity sell due to monthly rebalancing. Because of equity market strength (and bond market weakness) fixed allocation pensions will need to sell stocks and buy bonds to keep their percentages on target.
All this comes at a time when the market is massively, historically overbought amid the longest run without a 3% pullback on record. With a downturn seemingly underway, here are the seven of the most overbought large caps vulnerable to a nasty lurch lower:
Overbought Stocks: Amazon (AMZN)
Amazon.com, Inc. (NASDAQ:AMZN) shares are pulling back from their intra-day high that has capped a 15% rally since late December. Investors have been focused on the opening of the first cashier-less Amazon GO store in Seattle.
On a technical basis, shares are 8% above their 20-day moving average, 13% above their 50-day average and 30% above their 200-day moving average.
The company will next report results on Feb. 1, after the close. Analysts are looking for earnings of $1.85-per-share on revenues of $59.8 billion. When the company last reported on Oct. 26, earnings of 52 cents missed estimates by a penny on a 22.7% rise in revenues.
Overbought Stocks: Boeing (BA)
Boeing Co (NYSE:BA) shares have been losing altitude since going vertical earlier this month on positive headlines from a tax-cut bonus to employees and ongoing strength in the commercial airline industry. But with Boeing one of America’s key exporters, any trade war with China could hit the bottom line in a big way.
On a technical basis, shares are 6% above their 20-day moving average, 15% above their 50-day average and 41% above their 200-day moving average.
The company will next report results on Jan. 31, before the bell. Analysts are looking for earnings of $2.91-per-share on revenues of $24.74 billion. When the company last reported on Oct. 25, earnings of $2.72 beat estimates by 6 cents on a 1.7% rise in revenues.
Overbought Stocks: Nvidia Corporation (NVDA)
Nvidia Corporation (NASDAQ:NVDA) has been a perennial momentum favorite on Wall Street in recent years because of its exposure to cryptocurrency, machine learning and autonomous transport. But with Bitcoin on the slide, management telling retailers to focus on gamers not miners and Intel Corporation (NASDAQ:INTC) and others pushing in on the AI game, valuations look extended.
On a technical basis, shares are 9% above their 20-day moving average, 13% above their 50-day average and 38% above their 200-day moving average.
The company will next report results on Feb. 8, after the close. Analysts are looking for earnings of $1.16-per-share on revenues of $2.7 billion. When the company last reported on Nov. 9, earnings of $1.33-per-share beat estimates by 26 cents on a 31.5% rise in revenues.
Overbought Stocks: Netflix (NFLX)
Netflix, Inc. (NASDAQ:NFLX) shares exploded higher earlier this week after reporting solid user growth metrics driven by international subscriptions. But investors overlooked a deepening cash burn rate as the cost of producing the exclusive content needed to drive those subscriptions continues to rise.
On a technical basis, shares are 21% above their 20-day moving average, 28% above their 50-day average and 43% above their 200-day moving average.
The company will next report results on April 16, after the close. Analysts are looking for earnings of 63-cents-per-share on revenues of $3.7 billion. When the company last reported on Jan. 22, earnings of 41-cents-per share matched estimates on a 32.6% rise in revenues.
Overbought Stocks: PayPal (PYPL)
Paypal Holdings Inc (NASDAQ:PYPL) shares had been marching higher thanks to a series of analyst upgrades from the likes of Citigroup and Jefferies. But valuations look extended now amid M&A chatter concerning Square Inc (NYSE:SQ), with the benefits likely to accrue to buyout shareholders.
On a technical basis, shares are 5.5% above their 20-day moving average, 8.6% above their 50-day average and 33% above their 200-day moving average.
The company will next report results on Jan. 31, after the close. Analysts are looking for earnings of 52-cents-per-share on revenues of $3.6 billion. When the company last reported on Oct. 19, earnings of 46 cents beat estimates by 3 cents on a 21.4% rise in revenues
Overbought Stocks: Caterpillar (CAT)
Caterpillar Inc. (NYSE:CAT) shares had gained some 70% from their lows last summer on a rebound in the materials/energy industries and machinery orders. Things look extended here, however, and vulnerable to a reversal.
On a technical basis, shares are 2.7% above their 20-day moving average, 12% above their 50-day average and 37% above their 200-day moving average.
The company will next report results on Jan. 25, before the bell. Analysts are looking for earnings of $1.77-per-share on revenues of $12 billion. When the company last reported on Oct. 24, earnings of $1.95 beat estimates by 68 cents on a 24.6% rise in revenues.
Overbought Stocks: Blackrock (BLK)
BlackRock, Inc. (NYSE:BLK) shares benefited from better-than-expected quarterly results, pushing shares up roughly 20% from their November lows. But with the company’s performance highly correlated with the broad market, any pullback could impact future results with $6.3 trillion in assets under management.
On a technical basis, shares are 7.9% above their 20-day moving average, 13.6% above their 50-day average and 30.6% above their 200-day moving average.
The company will next report results on April 13, before the bell. Analysts are looking for earnings of $6.47-per-share on revenues of $3.3 billion. When the company last reported on Jan. 12, earnings of $6.24-per-share beat estimates by 22 cents on a 20% rise in revenues.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
