A Short Timeout For Tech Stocks?
Some Key Charts To Watch
Are we all enjoying the market rollercoaster this week?
If you picked up last weeks letter calling for a likely pause in the 2023 technology juggernaut, I hope my work has aided in you in some way.
Targets have predictably been met across a bunch of sectors and my work has now shifted and is asking what potentially comes next across the world.
Not just the US Markets, but in Europe and Asia also.
If you missed last weeks letter you can pick it up here - Nearing Big Tech Exhaustion.
In this weeks letter I’m going to get into possible market rotations, but lets start with a quick update on the broader market and of course technology.
NYSE Composite
Invesco QQQ Trust
SPDR Technology Sector ETF (XLK)
Nothing fancy about the charts above.
It’s just basic support / resistance / supply & demand and investor psychology, the 2 big questions everyone has
are we looking at a short term pause before big break outs?
are we dealing with a near term tops across the board?
But let me be clear, my work is still focussed on finding stocks to buy and we still have plenty of tech stocks in uptrends that continue to work well, I advocate sticking with them until systematic process says otherwise.
That said, over the last week there’s been a slight shift in approach to my work.
It’s been about finding the best beaten up buy low: sell high charts and perhaps looking at non-traditional areas of the market for strength.
YPF Sociedad Anonima (YPF)
I’m guessing for most of you reading, a $5B market cap Argentinian energy company with a low P/E and explosive earnings growth aren’t front and centre of your investment watch lists, but it’s 1 of the names that’s been ripping higher over the last week.
I’d never advocate jumping into a stock that’s 15% away from its optimal buy point and an RSI of 85.
It’s probably at shorter term profit taking levels, I’ll be watching that closely today, but hopefully the chart will give an idea of where to look.
Industrials? Materials? Energy? Commodities?
Or how about the banks?
HSBC Holdings PLC (HSBC)
Above $40, what’s not to like for 1 of the giant global banks?
Emerging Markets (EEM)
I’ve also been observing Emerging Markets with a lot of interest because I like to pay attention when the market signals a potential change of trend.
I’ve recently been working on a thesis of a possible rotation into China and while that thesis started off well with many stocks moving 10-15%, there’s been a lot of weakness since the Tuesday announcement of a 10bps cut to the LPR Rate which disappointed markets who were calling for at least 15bps.
So I’m keeping a tight leash on this area of the market, any further weakness and it’s stand back and observe time again.
I also laid out a bunch more charts via our YouTube Channel at the weekend.
In Conclusion
If we have an environment where upside objectives are being met at the index level and many key sectors are pausing, it probably requires a deeper dive into the market to find the best charts and companies.
I try not to over-think the index level, it’s more of a “guide” for me rather than a hard risk on/off signal.
I’m still looking at possible market rotations, but as I write this letter, we’ve just had news from Europe the BoE has unexpectedly raised rates by 50bps and we’re now seeing real weakness over here with the German Dax also potentially failing at ATH’s.
I made the bear case for Europe a few weeks ago, and the added concern for me is could the European markets potentially kick off a domino effect.
Letter 24th May - The Bear Case For Europe
Each chart on its individual merits is how I learned it.
I’m open to all possibilities from here, how do you see it?
Have a great weekend
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