The Week Ahead
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It will be a short trading week, with the markets closed on Thursday for Thanksgiving, and a 1 pm close on Friday. It doesn’t mean it may not be an active week, which based on the charts, it very well could be.
The 15-minute chart of the S&P 500 shows the selling we had seen for most of the last week, except for Thursday, is likely not finished. The rally on Thursday failed to fill the gap created on November 9. Additionally, the inability of the index to generate any follow through on Friday was also a disappointment.
There was a similar price action in the Technology ETF $XLK as well. The technology sector has taken over as the clear leader in the marketplace since Biotech’s mid-October meltdown. Should technology continue to stumble, the market as a whole will continue to struggle.
Technology is easily the market leader in 2017, with shares of the XLK up by 31 percent in 2017. Where Technology goes, the market will be for sure to follow. The setup in some of the leading components does not look promising over the short-term.
Microsoft ($MSFT) looks as though it is heading towards the gap created after it reported strong quarterly results. It means shares are looking for a 3-4 percent pullback from the current level of roughly $82.50 to $79.25.
Even Apple ($AAPL) looks susceptible to a pullback from around $170 to approximately $160, after running into resistance.
Facebook has about $10 downside risk from the current level around $180 to about $170.
The same could be said for shares of Alphabet.
If the technology sector starts trading lower than the entire market trades lower it is that simple.
The sell-off surely isn’t a doomsday type of scenario; this will likely be a continuation of what we have already seen. This slow pullback creating 3-4 percent decline in the S&P 500 ($SPY).
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Nvidia’s ($NVDA) is just down and out scary, it has gone completely parabolic. With the rate of the current rise, it can do nothing from here except go up in a nearly straight line. I’d hate to say it to all the Nvidia longs, but this run looks like it nearing an end.
How can you look at this chart above, and not admit that it makes you a little bit nervous? Then when you see this next chart, you have to be scared.
Experience has taught me through the years that stocks tend to find a trend and stick with it for some time. Then when the rally is starting to come to an end, the slope of the trend tends to turn higher, like on an expoential curve. But in this case, you can now see that the slope hasn’t changed once, but now twice. The uptrend has continued to steepen, which means the rise is accerlating. I have rarely if ever seen anything like it.
Cisco in the late 1990’s reminds me of this, as does Intel, which I recently wrote in an Investopedia article, and you can find it below in the free article section.
Don’t be so certain it will be different this time.
Free Articles Written By Mike:
Biotech Celgene Could Rebound By More Than 15%
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Michael Kramer owns XLK Puts
Michael Kramer and the Clients of Mott Capital owns shares of GOOGL
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Tags: #Nvidia #SP500 #Technology #Microsoft #Alphabet #Facebook #xlk