The weekly charts on the indices futures show that the markets are potentially overbought. This is very significant because several major companies will be releasing earning reports this week, as well. While most earning releases are projected to be lower than the previous reports, several of the reports from Monday actually came in above expectations.
For example, GOOGL's revenue forecast was 38.91B but the actual release was 39.28B with the EPS forecast expected to be 10.88 and actually came in at 12.77. However, even though the fourth-quarter exceeded expectations, shares lost 2.5% postmarket due to concerns over operating income growth. Will other releases scheduled for today, Wednesday and Thursday cause more concerns across the board for the indices? Additionally, since a majority of the earning releases will be after the market close, the indices futures may even have significant movement after the close and overnight.
The Nasdaq weekly chart shows that price is approaching the ATR stop (red plus sign) and the purple moving average. The Stochastics is at 95, which is considered potentially overbought. Additionally, even though price is making lower highs, the Stochastics is making higher highs. However, a bearish candlestick formation needs to form to signal that a potential retracement is about to begin. The retracement could find support at the blue moving average or at the prior low.
E-mini Russell 2000
The Russell 2000 weekly chart shows that price is approaching the ATR (red plus sign) with the Stochastics near the 100 mark. This indicates that the market is potentially overbought and a bearish candlestick would indicate the beginning of a potential retracement. A retracement down to 1440 (blue moving average) or even 1240 (prior low) could occur, provided that the bearish pattern develops.
E-mini S&P 500
The e-mini S&P 500 weekly chart is showing almost identical patterns as the e-mini Nasdaq and Russell 2000. Price is approaching the ATR stop with the Stochastics at or near 100, indicating a potential overbought market. A retracement down to the blue moving average or even a test of the prior low could occur.