What a distinction a day makes on the subject of firms reporting earnings. Earlier this week, shares of Alphabet had been hitting yet one more new all-time excessive, suggesting a renewed management position for this main progress title. However after a disappointing earnings launch on Tuesday, the inventory gapped decrease to convey the uptrend part into query. Let’s take a look at Alphabet utilizing a sequence of technical indicators, consider the preliminary postearnings drop relative to earlier worth assist and mirror on what additional deterioration may imply for this former high-flying “Magnificent Seven” inventory. When GOOGL pushed above the July 2024 excessive round $190, this represented a affirmation of a brand new uptrend part. Within the weeks following that new 52-week excessive, Alphabet settled into a variety between the breakout stage at $190 and a sequence of swing highs round $200. After lastly breaking above the $200 stage in late January, GOOGL approached this week’s earnings launch able of technical power. However after Alphabet introduced it had fallen wanting income targets, shares gapped decrease on Wednesday to check the earlier assist stage at $190. Wednesday’s hole decrease additionally examined the 50-day shifting common, a short-term development barometer that usually serves as a draw back goal for worth pullbacks inside an uptrend part. Our preliminary analysis of the postearnings actuality for GOOGL is a “bent however not damaged” thesis, as the value is now not making new highs however the hole decrease managed to carry a key assist stage. It might certainly be too early to declare a failure of the present uptrend part. If we concentrate on the relative power index, or RSI, for Alphabet, we are able to see that the brand new highs in January and early February have been marked by decrease momentum readings. This “bearish momentum divergence” implies that the newest all-time highs have been pushed by much less shopping for energy, a sample that usually happens at main market tops. So, whereas the late January breakout appeared bullish on the floor stage, a deeper assessment of worth momentum reveals that the breakout might not have been as constructive because it initially appeared. And whereas a breakout on weaker momentum doesn’t essentially assure a market prime, I’ve discovered to count on restricted upside when shares break larger on weaker momentum readings. As traders have an opportunity to additional digest the fact of Alphabet’s current earnings launch, if GOOGL drops beneath worth assist and the 50-day shifting common, we might count on additional draw back to the 200-day shifting common round $175. A serious trendline connecting the September and November lows may additionally function secondary assist throughout a bearish development part. How does this evaluation of Alphabet evaluate to the broad market circumstances? What considerations me concerning the markets in early February 2025 is that the bearish momentum divergence for GOOGL just isn’t an remoted prevalence. In actual fact, the chart of the S & P 500 index is that includes a sequence of bearish divergences as nicely. Right here we are able to see the brand new excessive in early December when the S & P 500 lastly reached the 6,100 stage, after which the following breakout in mid-January that took the S & P briefly above this excessive stage. An preliminary assessment of this phenomenon may recommend a bullish market part with the S & P 500 attaining new highs over the course of two months. However with the late-January try and push above 6,100, the center panel exhibits that the RSI truly made a decrease excessive. The underside panel shows the cumulative advance-decline line for the New York Inventory Trade, a sequence that additionally confirmed a decrease excessive going into February. Certainly, whereas shares akin to Palantir Applied sciences and Meta Platforms have pushed to new highs in February, this chart exhibits that breadth and momentum indications for the broad fairness markets stay fairly subdued. Legendary technical analyst and former High Gun teacher Greg Morris used to say “All new highs are bullish, besides the final one.” Given the weakening momentum traits for charts like GOOGL, we might certainly have seen the final new excessive till a corrective transfer has run its course. David Keller, CMT marketmisbehavior.com DISCLOSURES: None. All opinions expressed by the CNBC Professional contributors are solely their opinions and don’t mirror the opinions of CNBC, NBC UNIVERSAL, their father or mother firm or associates, and will have been beforehand disseminated by them on tv, radio, web or one other medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click on right here for the complete disclaimer.