SentimenTrader recently posted a chart showing that 42% of NASDAQ stocks were down at least 50% from their highs on Friday. And yet the NASDAQ index as a whole is only down 17% from its high. What gives? As I’ve been writing for months now, there is a stealth bear market in which important but not leading stocks are getting murdered while relatively minor damage in the generals props up the market cap weighted indexes.
Thursday afternoon gave us a microcosm of this. Apple (AAPL) reported good enough 4Q21 earnings with revenue +11% and net income +20% compared to 4Q20. I think many were scared that AAPL would report a bad quarter and take the entire market down with it. But the stock is currently +4% in the after hours and that may well be enough to hold the market up Friday.
However, while AAPL is getting all the attention, brokerage app Robinhood (HOOD) also reported 4Q21 earnings Thursday afternoon and things there were a different story. Funded Accounts, Assets Under Custody and Revenue were all essentially flat compared to 3Q21. Looking a little deeper, HOOD’s numbers show that almost all of their transaction based revenue comes from options, crypto and meme stocks. In effect, HOOD is a casino masked as a brokerage. That hasn’t stopped Cathie Wood from putting $176 million (1.5% of her famous ARKK ETF) into the shares. Nevertheless, HOOD shares are currently down 12% in the after hours to $10. That represents an 86% decline since its closing high around $70 shortly after its IPO about 6 months ago.
As I’ve said many times before, the major indexes are being propped up by 7 stocks – led by AAPL – that are hiding enormous weakness beneath the surface. First they shoot the soldiers, then they shoot the generals.