By J.C. Parets & All Star Charts
1/ Is It Whipsaw Season for Tech?
2/ Tech Halts Its Advance
3/ Rates Make Their Move
4/ Crude Stops for Gas
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1/ Is It Whipsaw Season for Tech?
Selling has gripped the markets as major indexes and sectors run into overhead supply.
This is particularly true for technology-related groups. We’re paying close attention to the short-term continuation patterns in these indexes as the sell-off picks up momentum.
The Prime Cyber Security ETF (HACK) is an excellent example, failing to break out of a massive reversal pattern.
If more tech areas resolve lower similar to HACK—and many are well on their way—let’s imagine the nature of the coming correction.
It’s not pretty.
The major indexes will likely experience severe retracements if too many of these reversal patterns come undone. That’s why monitoring the near-term action in tech is so important—mainly the flag and pennant forming at or near key levels.
Stock market bulls do not want to witness whipsaw season in tech.
2/ Tech Halts Its Advance
Not only are tech and growth stocks running into overhead supply on absolute terms, but the relative trends also imply that their current outperformance may take a breather.
Below is the Nasdaq 100 dating back to the early 2000s relative to the Dow Jones Industrial Average, the S&P 500, and the Russell 2000:
Notice how these ratios press against a shelf of former highs at the dotcom bubble peak and 2020 highs. These former highs signify a logical level for corrective action in the coming weeks.
However, if we finally get a decisive breakout above these resistance levels, tech stocks will likely kick off the next leg higher on absolute terms, too.
3/ Rates Make Their Move
Rates are on the move again, and they’re not rolling over.
The U.S. 30-year Treasury yield (TYX) has cleared numerous hurdles lately. It broke above a shelf of former highs. It rose to its highest level year to date. And it reclaimed its former 2014 high.
The question is no longer whether rates will fall later this year. It’s now more a matter of how fast they will rise.
Stocks and commodities would prefer a slow sideways crawl in yields. But if the risk assets don’t get what they want, another swift rise in rates could make for a bumpy ride into the holidays.
4/ Crude Stops for Gas
Crude oil futures have been on a tear, gaining over 20% since late June.
It’s not only crude. The entire energy space has shown impressive relative strength this summer. But the explosive advance for “black gold” is running into a logical resistance level.
Check out the shelf of former highs, making a significant area of overhead supply:
Crude oil retested those former highs today and quickly retreated lower, falling 2.00%.
It makes sense for crude to pause based on overwhelming supply, especially given the strong preceding performance.
It’s up to energy bulls to support price, as a corrective period seems likely. And it appears they have the upper hand—if the overbought reading on the 14-day relative strength index (RSI) is any indication.
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Originally posted 2d August 2023
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