When the market is this soft, it's really important to be aware of the macro climate.
This week, the market followed through on the softness suggested in my ChartWatchers article. One of the key components of the market has been the large-cap tech stocks. Over the last few months, I have been showing my FAANG chart. This week delivered a few more big names breaking.
In summary, Netflix (NFLX) and Adobe (ADBE) broke down a while ago. I have Adobe sitting on a trend line this weekend, but it broke the uptrend off the 2018 low a few months ago. This week saw continued selling on Amazon (AMZN) and Facebook (FB) below the trend line. Apple (AAPL) and Microsoft (MSFT) both have massive buyback programs to help hold the stock price. Lastly is Google (GOOG), which, as with Apple and Microsoft, is trying to pop through overhead resistance but seems to be having difficulty getting it going.
The big cap tech names are starting to slip. Some late China chatter added to the pressure on Friday. Alibaba (BABA) was down 9% on the week. Notice the relative strength uptrend going back years. Is that about to break? We can also see that the SCTR ranking can't get into the top performing category above 75.
The Nasdaq 100 has broken a 4-year major uptrend in relative strength compared to the $SPX. It would be naïve to suggest this weakness doesn't matter; the last 2 big corrections in 5 years have seen these relative strength trend lines break. Relative strength is compared to the S&P 500. Most if not all of the Nasdaq 100 are in the S&P 500.
While that is a massive clue something is changing, we also have lower highs and lower lows on the PPO momentum indicator. The most recent move towards the signal line on the PPO was a kiss-n-go signal, where it turns towards the signal line and then reverses away, confirming the downward direction. Take a close look on the zoom panel.
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I have so much more on this week's full video. While the US Dollar continues to push higher, commodities had a rough week. Gold, which has been an out-performer, looks more like it is topping out. Perhaps it is just a bull flag, but I cover Gold in the video. Oil continues to be weak after the Saudi attack.
Greg Schnell, CMT, MFTA
Senior Technical Analyst, StockCharts.com
Author, Stock Charts For Dummies
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