By J.C. Parets & All Star Charts
Friday, 16th June, 2023
1/ Microsoft Pushes Indexes Higher
2/ Software Steals the Show
3/ Bitcoin Tests Support
4/ British Pound Breaks Out
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1/ Microsoft Pushes Indexes Higher
Two weeks ago, we discussed the implications of Apple (AAPL) reaching new all-time highs as it relates to the broader market.
Today, we’re showing Microsoft (MSFT) and the technology sector (XLK) pressing against new all-time highs as well. While Microsoft was able to achieve a new all-time high on Thursday, both MSFT and XLK gave back some gains today and closed just shy of their respective weekly record closes.
AAPL and MSFT are the world’s largest and arguably most important stocks. Together, they represent 46.6% of the technology sector.
Seeing AAPL and MSFT set new highs means that the large-cap tech index XLK likely can’t be too far off from doing the same.
2/ Software Steals the Show
Software stocks were all the buzz this week, with massive rallies from Adobe (ADBE) and Oracle (ORCL) on the heels of big earnings beats. However, it isn’t just the mega caps that are trending well in this industry.
The SPDR S&P Software ETF (XSW) depicts broad-based strength from this group of tech stocks, as the fund holds over 150 stocks, none of which have a weighting greater than 1.3%. Here’s XSW threatening to resolve higher from a base as it trades at its highest level since last April:
If and when XSW takes out these former highs with authority, we can be confident that the path of least resistance would be higher for another technology subsector. And due to the index’s composition, we can also be confident that there is broad participation from software stocks.
We’re watching XSW for a decisive resolution and some potential bullish follow-through in the coming days and weeks. Notice how the anchored volume weighted average price (AVWAP) from all-time highs lines up almost perfectly with the base breakout level, reinforcing the importance of this reversal pattern.
3/ Bitcoin Tests Support
Cryptocurrencies have lagged in the shadow of technology stocks over the past three months.
As you can see in the chart below, after breaking out a bearish-to-bullish reversal in Q1, Bitcoin (BTC/USD) has pulled back, challenging a critical polarity level of around $25,000.
With so much price memory here from the past year, there’s a good chance that former resistance will turn into support.
The bulls want to see this level hold, as it is a logical area for buyers to step in and put a floor in Bitcoin. However, if price violates these former highs, risks would turn to the downside for the entire crypto space.
4/ British Pound Breaks Out
The British pound (GBP) has been higher seven out of the past eight sessions and just closed the week at its highest level since last April. We can add this to our growing list of bearish data points for the U.S. dollar over the short term, along with things like new 52-week highs for emerging market currencies (CEW).
Here is GBP/USD emerging from a 14-month reversal pattern, with resistance shown at the May 2022 and May 2023 peaks just north of 1.26:
These former highs are our line in the sand. If we’re above there, the bias is higher for GBP, and this could be a vehicle to express a bearish thesis on U.S. dollars.
Also notice how momentum registered an overbought reading this week in the lower pane. This is solid confirming evidence that these new highs could be here to stay.
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Originally posted 16th June 2023
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