Technology Cracks Drove Sector Pullback
The week started with an interesting divergence highlighted last Saturday in the Weekly Compass: $Dow Jones(.DJI)$ showed a likely bullish setup, while tech exhibited cracks. Indices usually move in the same direction but with different proportions, and today those divergent setups indeed pushed both indices in opposite directions. $Dow Jones(.DJI)$ +0.35% vs $NASDAQ 100(NDX)$ -0.71%.
The described cracks for tech are playing out. From the high-probability setups mentioned last Saturday, $NVIDIA(NVDA)$ was set to decline and the stock lost -1.3% today. $Advanced Micro Devices(AMD)$ was highlighted for a decline and fell -2.3%, while the $Invesco QQQ(QQQ)$ ETF dropped -0.7%.
As I have noted several times, is everything bearish?
The answer is no, and the probabilities for a crash remain low. There are individual giants showing strong bullish setups. As highlighted on Saturday, $Costco(COST)$ and $Wal-Mart(WMT)$ carried high probabilities for a bullish move, gaining today +1.3% and +1.6% respectively. I also noted that NFLX maintains its own personality when a setup is strong; regardless of broader market action, the stock proved resilient today despite the tech pullback.
My primary focus is the $S&P 500(.SPX)$ , and I maintain a constant watchlist of the 20 largest mega-caps and ETFs across sectors to monitor rotation. Today, the semiconductor sector ( $VanEck Semiconductor ETF(SMH)$ ) validated the bearish setups we recently studied, serving as the primary market condition to watch.
Markets are always moving - and sometimes, the best move is knowing what works for you.
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