Let’s call this market pull back what it is: a pull-back in mega-cap tech.
Since Big Cap Tech has become the largest players in most of indexes, a pull back in this segment of the market has the affect of dragging down about everything. So, last week, down it went.
A quick look at the ETF ticker FDN and you’ll see that tech is officially in a correction (so more than 10% decline).
This is not to say other segments of the market are immune. Many sectors of the market dropped last week. But tech seems to be the tail wagging the markets.
Technically speaking (no, this is not a euphemism, we’re talking about using technical/quantitative analysis here), the markets may have found a foothold here. If so, look for volatility to remain, but we may see pricing begin to drive back toward SPX 2425 this week.
If you want to get into the details behind this number, it’s simply the nearest round number to a mid-point of about a calendar month of trade data. Last week markets traded up over 1.5 standard deviations from the 21-period trading average (trading days, so about a calendar month). When the selling started, the markets declined to about 1.5 standard deviations below the same period. So, for this week, look for things to oscillate back towards the middle… from over-bought to over-sold back to the middle of the range.
The S&P 500 50-day moving average is at 3331, That’s a likely area for support this week (even if the markets dip below it intra-day). If this support area fails there could be an extended slide lower. We will address this in next week’s blog.
For this week, look for volatility to remain, but for the bias to be slightly positive as large-cap tech looks to likely regain some of its lost ground.
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