Technical Analysis: Techs Come Back Into Favor
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It took blowout earnings from the likes of Apple, Amazon and Microsoft, but the Nasdaq (first two charts below) is finally outperforming the broader market. The index gave its first buy signal today under Gerald Appel's relative strength system since a disastrous one in late February. Coming on the heels of a long uptrend, we don't know how well the signal will work out, but we'll assume that techs will continue to outperform until proven otherwise. Technology fundamentals seem to support the outperformance, and even the chip sector has shown some signs of hope. The market backdrop in general remains positive for a few more months, but market internals have been lagging of late, which suggests that the market could be vulnerable to a pullback, but end of the month inflows should provide some support next week.
The Nasdaq faces resistance at 2575, and 2535 is important support. The Dow (third chart) is hitting some significant resistance here. Support for the blue chips is 13,068-13,078, 13,000, 12,900 and 12,800. The S&P (fourth chart) has important support at 1480, and resistance is 1500-1505. Given conflicting information between slowing growth and rising inflation, bond yields (fifth chart) made their choice. The 200-day average is once again being tested.