The Last Hope
Hate It or Love It – You HAVE to Watch
Technology is the backbone of the U.S. stock market.
It represents one-third of the S&P 500 and holds roughly the same combined weight as the bottom seven SPDR sectors.
It’s the Pete Weber of the Stock Market. Hate it or love it, you have to watch it.
Failed Lift Off
Technology was shaping up for a classic base breakout post presidential election.
The narratives we’re perfect.
Bitcoin was breaking out to new all-time highs.
Fed Chair Jerome Powell lowered interest rates.
A breakout seemed inevitable. But it didn’t happen. The rocket failed to lift off.
As is often the case, failed moves lead to fast reversals.
Technology has been down five of the last six trading days, clinging to the hope of finding support at its 50-day moving average.
The Last Hope
Not only does the S&P 500 lean heavily on Technology, but the sector itself is dominated by a three-headed monster: Nvidia, Microsoft, and Apple.
These three stocks alone make up over 40% of the sector’s weight. For Technology to reclaim its all-time highs, all three need to fire on all cylinders.
Right now, Nvidia is the last hope.
Nvidia reports earnings on Wednesday. While I won’t speculate on the results, this stock is the poster child of the AI boom, up over 180% year-to-date.
If Nvidia delivers another shocking upside beat, it could be the catalyst that propels Technology and the broader market back to all-time highs.
The chart is shaping up nicely, sitting above it’s breakout level heading into earnings.
As Nvidia goes, so will Technology.
The Other Two Heads – Lagging Behind
Apple: After failing to break out to new highs, Apple has retreated back into its trading range with no well defined intermediate term trend.
Microsoft: A relative underperformer since July, just can’t seem to reclaim its 200 day.
Technology Handcuffs
As U.S. investors, we’re handcuffed to Technology’s performance.
While it has driven market gains in recent history, a failed breakout combined with the struggles of two out of three major components is reason for caution.
For now, the spotlight is on Nvidia – our last hope.
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Larry
