Week 19 Technology Trending and Performance
We know that Technology has been the leader this year. In fact, most of the gains in the overall markets can be attributed to the tech stocks, especially the big tech stocks. So, while I like to review tech sector indices, I also like to review the top stocks that are driving the market.
Summary
Technology has been the leader and mostly the reason why markets have performed well this year.
Most gains were achieved in Q1 and after that, even the technology sector, has been flattish.
Some of the instruments are starting to see overhead resistance that has already started dampening their movement to the upside.
The risk is now to the downside. So, although I will wait to short QQQ as it is still trending bullish, I will use the stalling in the technology sector to trade SPY and some select other ETFs to the downside.
Trending Heat Map (Tech ETFs)
The highlighted are the changes in trending from 1 week back. The big observation is that the QQQ, XLK and XLC are all trending perfectly bullish. I track XLY here because it has AMZN and TSLA as its top holdings. The XLY is also trending bullish. The underlying stocks within these 4 ETFs is what is not just holding the markets up but actually driving the positive returns for the year so far.
We can see that FNGS is also trending perfectly bullish. This is a highly concentrated ETN comprising of the top 10 technology stocks. As of 3/30/2023 the weighting was:
This is where most of the action has been this year so far. And much of the prospects for the rest of the year depends on how much they can maintain their momentum. Let us review the trending of these stocks to see how they look at this time.
Trending Heat Map (Big Tech)
Overall, the picture continues to look good. We know that AAPL and MSFT in combination is 14% of the S&P 500 and those remain perfectly bullish. Now GOOGL and CRM have joined them in being perfectly bullish as well. More proof that tech is driving the market.
Performance (Tech ETFs)
We can see that for May so far most of the ETFs are positive and yet the S&P 500 (SPY) is negative. The situation is reverse for month of April. For other periods, there is alignment for the most part.
The most interesting observation for me is the comparison between the Q1 returns and the YTD returns. It is clear that almost all the gains YTD were generated in Q1 and after that the ETFs have mostly been down or flat. That tells me that momentum has clearly slowed down even in the technology sector.
Performance (Big Tech)
Not much more to glean from this table than what we have already observed.
I have already covered the QQQ chart when covering the major markets. I have also covered the XLK and XLC chart when covering the SPX sectors.
SMH chart
Semiconductors have been very active this year with strength from NVDA and the rest of the top stocks driving it higher early part of the year. Recently though, they seem to have stalled and INTC has downright turned bearish. I have traded both sides of SMH this year given the activity around it. Right now, it looks like the downside risk is higher as price has stalled around the bottom of that upward moving channel.
KWEB chart
This is an interesting and choppy chart. The trading volume on this China internet ETF is surprisingly high and I have taken the opportunity to trade this profitably mostly to the downside. We can see that even now there is an opportunity to trade this to the downside. There are 2 more unfilled gaps below and the trending remains bad.