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Tech sector leading the way?


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The markets seem to be in an edgy slumber before FOMC, I'm expecting that to change when the US opens and I predict softness in the stock indices ahead of FOMC and then a possible rally.  On all stock indices I see a wave 1 coming to an end but I think there is one more leg down before we get the retrace rally to wave 2.

 

While waiting for all that I thought I take a look at the tech sector, prompted by the results driven drops of some of the FANG and BAGLE tech market darlings of late.  That and the first sales drop for Apple since 2003...  What I discovered was interesting to say the least and may have indications for the whole market, not just the Tech sector.

 

I started with the monthly chart and came up with the mother of all double tops, or is it?  My EW count best fits an A-B-C to the most recent top but there is no clear Neg Mom Div, which is always a worry when trying to call a top.  The alternative EW3-4 with an all time high at W5 is very much still on the cards.  This is borne out in greater detail on the Weekly and Daily charts.  

 

On the Daily I have a clear 1-5 up to recent turn point after a 1-5 down.  Normally I'd like to see an A-B-C down to indicate another higher high to come in 1-5 fashion but the picture is more murky than that...  There is also a double top on the Daily with Neg Mom Div, which prompted the drop that ended in Feb 2016.  The clear 1-5 up to the 19 April 2016 turn with Neg Mom and a leg down suggests at a minimum a retrace back down (Wave 2 or B or possible the beginning of a strong wave 3 down).

 

The Hourly chart suggests at least one more leg down to complete the first wave of the bear movement but we will not know which scenario we are dealing with until we see the rally back after this current drop is completed.  However I do think that all scenarios point to a decent drop for now and this is likely to be mirrored in the other stock indices.  I am forecasting a completion of the first wave down on all stock markets (Nikkei possible exception) probably today with Us open/FOMC and then a retrace rally to W2 before a longer drop.  

 

Interestingly the Tech market is much crisper than the others...  One to keep an eye on as a path finder?

 

Here are the charts (looking forward to thoughts):



 

 

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  • 2 weeks later...

Sometimes you find a market obeying the "rules" perfectly.  The Nasdaq looks like one just now.  Having been on the mother of all bull runs it is now faltering with some poor results for tech darlings and with growth stocks falling out of favour vs so-called value stocks or defensives.

 

Just look at the accuracy of the tramline hits in the hourly chart below.  My EW count suggests a wave 5 to come of this larger scale wave 1 down to the Daily Fib 62% (Blue line).  A double hit on the lower tram is likely for waves 3 and 5 of this final wave 5 before a significant rally and then lets see what happens next.  This bodes well for a further leg down in other markets as the Tech sector has been leading the bull charge since 2009.

 



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Forgot to add that, as always, the alternative view is that the current Daily resistance marks the end of this move already, a break of the upper tramline would signal the move is over than the retrace has begin.

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