U.S. Stocks Face "Black Wednesday": Tesla and Nvidia Lead Tech Sector Decline

On Wednesday, July 24th, we saw a big drop in the U.S. stock market with all three major indices takin' a hit. The Nasdaq fell a hefty 3.6%, with Tesla leading the charge down by more than 12%, and NVIDIA also slippin' nearly 7%.

Now, as we're just gettin' into earnings season, this sell-off has got folks wonderin' if it's time to cash out and take profits.

Now, let's grab some macros. The U.S. July Markit Manufacturing PMI surprised us by shrinking to a seven-month low. And with new home sales droppin' for the second month straight, reaching the lowest annual total since last November, we're seein' more signs of an economic slowdown. Even Bill Dudley, the former 'Number Three' at the Fed, is callin' for a rate cut next week, stirrin' up those expectations for lower interest rates again.

Alright, y'all, let's dive into the technicals. The S&P 500's recent performance aligns with our earlier predictions; it's still in a short-term pullback, and this correction isn't quite over yet. However, the price has now dropped to the lower boundary of the rising channel, which offers some level of support.

If the price breaks below this support, the pullback is likely to continue, with the next target support level around 5340. On the other hand, if it holds above this support, we might see the end of the correction and a potential return to an upward trend.

From my perspective, the downward momentum still feels pretty strong, and since we're lookin' at a weekly-level pullback, it might take a little more time to finish this correction.

On the stock front, Tesla took a tumble, droppin' over 12% on Wednesday, shavin' off nearly $90 billion in market value. This happened after they posted the lowest quarterly profit margin in five years, with earnings per share fallin' short of expectations for the fourth quarter in a row.

The stock's chart is unfolding just as we predicted. It failed to break above the short-term downtrend line and instead fell right through the support level created by the previous gap up. This strong downward momentum suggests that the next support level to watch is around the previous high at approximately 205.6.

In my view, the negative impact from Tesla's recent disappointing earnings report is likely to weigh on the stock in the near term. So, for those of y'all thinking about buying the dip, it's wise to tread carefully and keep an eye on the overall market sentiment.

But it ain't all bad news—IBM gave us somethin' to smile about. Their revenue grew by 2% in Q2, hittin' $15.8 billion. Since mid-2023, orders for AI consulting and software have more than doubled to over $2 billion. IBM shares even jumped more than 3% after hours!

However is it a buy? The stock has been in an overall uptrend, and it's currently experiencing a short-term pullback. If IBM's price opens higher and continues to rise tomorrow, it could signal the end of this correction and the start of a new upward leg.

However, it's important to keep in mind that the broader market is still in a pullback phase. For those considering a short-term entry into IBM, it's crucial to weigh the systemic risks from the overall market trend. It might be a good idea to manage your position size carefully and stay mindful of the index movements.