This is the Moment for Tech Bulls
During the market’s latest decline, tech led to the downside. This raised my alarm bells given the sector’s tendency to lead both to the upside and the downside. In other words, tech typically has the first-mover advantage compared to other sectors.Have a look at the chart of the large tech ETF, the Technology Select Sector SPDR (XLK), below…
The decline from the July 5 high to the August 5 low was 19.9%. This means we were 0.1% away from satisfying the arbitrary definition of a bear market. We probably would have seen “Markets in Turmoil” specials on CNBC if it had dropped another 0.1%.This was the biggest decline XLK faced since 2022. Prices even took out the April 19 low to the downside, but did so with a case of bullish divergence in price from the RSI indicator. That is, prices made a new low, but the momentum indicator did not. It’s common to see such divergences at important market turning points.But then tech stormed out of that low and led the market higher for a couple of weeks. This was an encouraging sign. However, the rally stalled out in the resistance zone at 222-228, drawn on the chart above. In the process, it may have formed a lower-high. To be clear – I don’t think the August 22 high is going to hold. It looks like prices just completed a higher-low on August 28 following Nvidia’s earnings, but the key is for XLK to exceed resistance at 222-228 and August 22 high.If it does, I suspect this market to soar at least going into the election. But if not, we’re probably in bigger trouble. I’ll be sure to keep you posted on these sector developments.More By This Author:Nvidia’s Earnings Loom In The Summer Stock Snooze-Fest
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