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Tech Is Jittery, Watch Gold

By Monica KingsleyStock MarketsFeb 25, 2021 12:20PM ET
www.investing.com/analysis/tech-is-jittery-watch-gold-200563289
Tech Is Jittery, Watch Gold
By Monica Kingsley   |  Feb 25, 2021 12:20PM ET
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Fed Chair Jerome Powell has completed his testimony, with markets rejoicing the promise the Fed remains accommodative. Value keeps surging over growth, and regardless of yesterday‘s great performance, tech has a vulnerable feel to it – semiconductors lead higher, fine, but communications didn‘t confirm, and the health-care-biotech dynamic isn't painting an outperformance picture either. Real estate isn't taking as strong a cue, while consumer discretionaries' recovery could also be stronger. Thus far though, no need to think about taking losses to optimize your gains elsewhere.

Just as I wrote yesterday:

(…) the financials benefiting from the greater spread, won't save the day, as the key chart to watch now is technology and also health care. … The sectoral outlook remains mixed, even as value continues greatly outperforming growth this month. … Long-term Treasuries are starting to hold greater sway over the stock market fate now, too. The dollar‘s woes thus far continue playing out largely in the background.

Not to get complacent, the GameStop (NYSE:GME) squeeze has made a comeback yesterday. Will it coincide with broader stock market woes on par with late January? It is way too early to say.

Let‘s jump right into the charts for an objective momentary view instead.

Here they are, all courtesy of www.stockcharts.com.

S&P 500 and Its Internals

S&P 500 Daily Chart.
S&P 500 Daily Chart.

Strong S&P 500, everything looks fine on the surface – just as should be, befitting buy-the-dip mentality. Strong volume, no meaningful intraday setback, so far so good.

RSP ETF Daily Chart.
RSP ETF Daily Chart.

The equal weight S&P 500 chart is looking better and better day by day. New highs, strong uptrend, broadening leadership. It‘s a mirror reflection of the big names‘ woes, and a testament to value outperforming growth. This bull run is far from making a top.

Credit Markets

HYG-SHY Ratio.
HYG-SHY Ratio.

High-yield corporate bonds (iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG)) had a good day yesterday, and so did the high-yield corporate bonds to short-dated Treasuries (HYG:SHY) ratio. Yet, it‘s the daily stock market outperformance that is noticeable here – optimistic sign of an all-clear signal. I'm not taking it totally at face value given tech performance. In a short few days, I can easily become more convinced though.

Technology

XLK ETF Daily Chart.
XLK ETF Daily Chart.

Strong daily tech (Technology Select Sector SPDR® Fund (NYSE:XLK) ETF) upswing, yet only half the prior downside erased so far, and the volume could be higher compared with the preceding downswing. Semiconductors (SPDR® S&P Semiconductor ETF (NYSE:XSD) ETF) are leading again, fine. Yet, it's the heavyweight names that matter the most to me right now. Check out yesterday‘s observations:

(…) The tech jury is still out, and this heavyweight sector remains vulnerable, with consequences to the S&P 500 if it doesn‘t keep on the muddle through recovery path at the very least.

Summary

Stock bulls did great yesterday, but everything isn't fine yet in the tech realm. Due to its sheer weight in the S&P 500 index, pulling the cart a bit more enthusiastically is what the 500-strong index needs to take on new highs, because value stocks can't do it all.

Disclaimer: All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.

Tech Is Jittery, Watch Gold
 

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Tech Is Jittery, Watch Gold

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Comments (5)
Cornel Pod
Cornel Pod Feb 26, 2021 9:26AM ET
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Thanks, Monica! I guess that you were right ab tech pulling down the market. While the market was crushed in the past 2 or 3 instances due to US10Y spiking, given the current circumstances, I don't believe it will this time. Bonds went to orbit planet far out past year and thought they had no limit.
Monica Kingsley
Monica Kingsley Feb 26, 2021 9:26AM ET
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Thank you dear Cornel, and seeing XLK stop, and HYG carve a nice lower knot, is positive. Good start. need to see more. TLT reversing, let the effects play out, and see what they do here. Dollar enjoying lower rates - I hinted at that today. Looking forward for the closing prices. Hope you enjoyed the answers to you in Tech Holds Key To S&P 500. Have a good day!
Monica Kingsley
Monica Kingsley Feb 25, 2021 12:59PM ET
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Fresh update - I looked for oil to recover - it did, but copper gained no traction, big names such as TSLA unconvincing, tech weak, high volume in declining HYG, LQD down, TLT falling in a straight line with volume taking on recent records = weak SPX but less fresh downside below $1,773 in gold... risk-off winning
George Pichurov
George Pichurov Feb 25, 2021 12:59PM ET
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Monica Kingsley
Monica Kingsley Feb 25, 2021 12:59PM ET
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That was the fresh update for yesterday's session. Gold was stuck in the low $1770 indeed, but crucially I looked for the oil-copper tandem to work, and it didn't. Right now, We're in a weak constellation with both silver, oil, and stocks down. So, the outlook for the European session on Fri is more bearish than bullish for stocks really, and gold rather sideways in the coming hours. Just a quick point for everyone, if I include intraday updates, I am more often than not taking on the very short-term, because as Robert correctly says, what wasn't very likely in gold 2-3 weeks ago, can become reality when other markets align through that time. See TLT - we're on the cusp of stabilization for the moment - HYG absolutely didn't convince me. Thanks for all the comments.
Monica Kingsley
Monica Kingsley Feb 25, 2021 12:59PM ET
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George Pichurov Yes George, that was yesterday session outlook, and not much positive has happened overnight.
Robert Flores
Robert Flores Feb 25, 2021 12:44PM ET
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Everything is selling off! And gold is ticking upward! I hope its short lived
Show previous replies (8)
Yousef Aldwairi
Yousef Aldwairi Feb 25, 2021 12:44PM ET
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Bro last time u replied me when I commented on Monica previous post that gold is heading to 1680 u was so positive, what changed Ur tone now,I see that Monica is doing great job, but she is unable to see tue clouds full of rain,When she will notify it will be too lateRight now gold 1768,We aren't anymore above 1770From my point of view,That usually Analysist sees what they want to seeIts your investment u should do your own and look for both sidesTake care
Monica Kingsley
Monica Kingsley Feb 25, 2021 12:44PM ET
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Robert Flores Please look at gold-dollar short-term correlation. It's positive now, meaning that... But if yields stabilize, or even retreat as I say, gold would trade with less downside pressure compared to prior week.
Monica Kingsley
Monica Kingsley Feb 25, 2021 12:44PM ET
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Yousef Aldwairi That's fine, Robert is thinking in terms of scenarios just like me, and he is also updating them. When we comment on different statements coming from different times, it become more likely inaccurate. And I thank you Yousef, of course I'll bring up a full analytical case whenever I see something odd - just like I did yesterday for both tech and gold. And it always comes some time before the actual happenings - I was ready with the published analysis at mine half an hour before the US open, it takes some time to spread it all around, and come back here to https://investing.com to talk it through. The flavor of today's European trading is bearish
Robert Flores
Robert Flores Feb 25, 2021 12:44PM ET
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Yousef Aldwairi the thing is that you maybe more of a long term trader- investor. I am more short term, and i want to take advantage, thats why I went dollar long yesterday- to protect my account from a drop in metals- no analyst that I follow gets right all the time - in the long run, gold will go way higher- this prices are great to buy more
Robert Flores
Robert Flores Feb 25, 2021 12:44PM ET
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Monica Kingsley in years past dollar and gold went up together, I remember clearly- that why i habey pulse on the 5hr chart and will get out of my hedge when I see the turnaround
Richard Clinton
Richard Clinton Feb 25, 2021 12:41PM ET
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Great insights Monica. Thank you!
Monica Kingsley
Monica Kingsley Feb 25, 2021 12:41PM ET
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Thank you Richard... stocks have a hard time finding bottom, and gold is looking almost as an oasis of stability in the recent hour. Even oil flipped negative on the day before I finished posting.
Karan Mitra
Karan Mitra Feb 25, 2021 12:26PM ET
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Thank you! Any thought ps on gold?
Monica Kingsley
Monica Kingsley Feb 25, 2021 12:26PM ET
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Please read the precious metals part on my site - I am always picking one half of the daily article for here, to make it on time for you all to see here and talk here then.
 
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