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Range Trading Continues

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Tuesday saw some upside from Monday's recovery but the trading ranges I marked on the charts over the weekend remain valid so no change in the status quo. The S&P shows this best with the trading range defined by the former 'bull flag'. Today's close left the index just below resistance. The lower close could suggest another run back to 2,590s.

Have the FAANGs come to the end of their bullish run or is there still life in the tech sector? How are you allocating for that going forward?

Posted on Investing.com " It has been a rocky start to 2018 with direct and indirect Trump factors; for example, Cambridge Analytica (+ fake news distribution), Trump vs Jeff Bezos and a new tariff war, hitting certain FAANG stocks, with the contagion spreading to those indirectly impacted and the broader Tech sector. But not-to-long ago, the same Trump factors were driving the post-election rally; ‘Business Man’ leader, accelerated deregulation with industry friendly appointments, funding cuts to regulatory agencies and massive tax cuts favoring the investment classes. In reality, the “Trump factor” is a bit of a red herring; it’s the uncertainty and randomness of what may come – be it Trump, terrorists or natural disaster - rather than what has come that’s the problem. With that in mind, we can only consider how markets value FAANG component stocks here-and-now."

Dow Breakout Stalls; Semiconductors Make or Break.

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The earlier moving Dow Jones got pegged back a little as it fell inside its prior consolidation. Similar moves appeared for the S&P and Tech Averages but as these were still range bound prior to Friday their selling was not as noticed. Markets are in a 50:50 tug-of-war between bulls and bears as these (now) 3-week consolidations work their way to a conclusion. I have redrawn the consolidation for the Dow. Friday's mini-breakout could be viewed as 'bull trap' but I think it's probably fairer to broaden the resistance level for the consolidation. The 200-day MA again looks important but another test so close to its last maybe one too many.  Volume climbed to count as distribution but overall volume was still quite light. Technicals are mixed.

Dow Breakout

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Markets look to have found a new routine with 200-day MAs acting as working support. The 'bear flags' I had marked for the S&P and Dow Jones Industrial average look toast given the latter index has broken resistance from what now looks to be a horizontal consolidation. However, the larger consolidation from all-time highs has yet to be challenged but could see a test Friday or Monday.

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