Is Stock Market Armageddon Imminent?

Some Key Charts To Watch

Please excuse the click bait headline this week, but has everyone else noticed how the market suddenly got a lot tougher this month?

Every year, coming into August and September I like to get the telescope out and watch for massive meteors hurtling toward the market.

It’s just easier to prepare for this time of year WELL in advance. I’ve always been that way.

If you missed last weeks letter covering seasonality - Chop Season For US Stocks , I’d recommend checking that out because it sets the scene well and this weeks analysis is essentially a continuation with some big charts below.

But lets start by diving head first into Tech, because I know from my email inbox, many are wondering what I think about buying dips just now.

SPDR Technology Sector (XLK)

2 weeks ago, I began prepping our clients for the possibility of XLK failing at all time highs, and also presented the levels to watch for a move higher in the US Dollar, both of which look to be playing out so it’s no surprise to see the market come under pressure. We’ve been on top of it.

Now I know what you might be thinking.

But Sam, XLK is basically just Apple and Microsoft, and it’s a valid point.

That’s where Equal Weight comes in.

SPDR Equal Weight Technology (RSPT)

Want to take Apple shitting the bed with earnings OUT the equation?

No problem, we can do that.

That’s why equal weight helps, and as the chart demonstrates, we’re also stalling at logical price levels.

It’s no real surprise to see tech stall and chop.

Invesco QQQ Trust ETF (QQQ)

Coming into the week, the Q’s are front and centre, and while many folks like to use QQQ as the gauge for tech, some of you might be surprised to know it’s only got 55% Technology exposure and 45% of everything else.

If you’re in the camp you want to buy the dips, you probably want to see the Q’s hold onto this $370 level.

I definitely want to see the Q’s hold up because I much prefer a bullish environment and we just need to look at the chart for XLK to see how failed break outs look.

“Failed moves in the major averages have the potential to smash your face in if you don’t manage risk” (quoting myself)

ARKK Innovation ETF (ARKK)

Another important gauge of market risk appetite is showing a bit of weakness and retesting big levels dating back to a year ago.

This $45 level probably needs to hold up as a decisive break lower probably adds to the headache.

Amazon (AMZN)

Stocks like Amazon have met our upside targets, and while there are definitely areas of the market showing strength, it’s getting a lot tougher from a stock picking perspective.

Anybody and their dog can identify a chart showing a break out, but finding the break outs that are going to trend with the best risk : reward propositions, that’s a whole other endeavour.

In Conclusion

We’ve been on the record since July last year when we recommended buying value stocks amidst the market carnage, and then made a tentative market bottom call in October followed by the rotation back INTO tech at the beginning of the year, it’s all time stamped.

So if you’re new to my work, I’m not a perma-bear and I want to be clear about that.

It’s been an incredible year if you’ve paid attention to the charts but it’s now getting late in the game for this phase of the market, there are signs of exhaustion and price is probably telling everyone to be a little more careful and not to get too loose.

I’m still looking for stocks to buy and I’m still currently finding the best charts for our subscribers, but everyone is very aware of the levels I’ve laid out above and they have been for a few weeks now.

The dip might get bought up and the market could rip higher over the next week, which I’d be incredibly happy about, but I’m of the belief if we see the Q’s and small caps take a turn lower, coupled with energy ALSO taking a back seat, there’s going to be a lot of headaches and tough decisions to be made.

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