Tech Stocks: What Next?!

Below is a transcript from Monday's Morning Market Hit video above (charts are at the bottom).

Welcome to Shortview Trading. This is your morning market hit for Monday, 2nd of September. What matters today for markets? In particular, if you're a trader of US equity futures with a one to two-week time horizon, what should you be thinking about and focusing on? Which short-term models will give you the clearest steer on market direction? That is the purpose of this clip.

Well, as momentum in US tech stocks faded last week, as you can see on this chart, we had a strong Wave 2 relief rally from early August, in which equities retraced a large portion of their July to August losses—their losses from Wave 1. Then in the past week, you can see the NASDAQ started to roll over, breaking below its 50-day moving average following that bearish key day reversal pattern on the 22nd of August, which you can see highlighted in this chart. The shape of the Philly SOX is similar; we had a large Wave 2 relief rally, but momentum faded last week. Like the NASDAQ, we had a bearish key day reversal on the 22nd of August, and we also had one at the top in July. Bearish key day reversals are when the index opens above the prior day’s high, sells off during the session, and then closes below the intraday low of the prior day. These technical patterns are designed to signal trend exhaustion and are often good at turning points.

US equity markets have lost a bit of momentum in the past week. Adding to that, there are signs of tightening liquidity in markets. If you take a look at Bitcoin, for example, it’s a key barometer of liquidity. The price has been trending down since earlier this year. It’s a similar story for silver, also trending down in recent months, all of which supports an expectation of a phase of risk-off in this equity market. With that, a market that is probably priced in too much easing from the Fed, at least in the near term. We now have about 220 bips of Fed rate cuts priced by the end of next year; most of that’s been rapidly priced in since April. The risk for markets is that some of the cuts are priced back out, perhaps on signs of stronger US macro data or signs that a US recession is unlikely anytime soon. If that happens, it sets markets up for a dollar rally. It’s interesting, of course, to see that the dollar is currently deeply oversold; it’s poised for a bounce, all of which potentially creates a risk-off environment for equities in the near term.

The key question, of course, is are we going to get a Wave 3? Will there be another wave of selling in this equity market where these indices go back to their lows from early August? Maybe they break below them. How should one be trading this equity market? We answer all of that in our daily publication. In it, we make a one to two-week trading recommendation—long or short—on US equity futures. It’s available on the website to subscribers. We also offer a free trial. If you’re interested, click on the link below, enter your name and email address, and we’ll set you up with a free trial of our daily trading publication.

How do we go about making these calls? What gives us an edge? Well, it’s indicators like this one you see on your screen now. This is a BRE model for the US equity market. It’s often timely at signaling turning points on a one to two-week timeframe. It was generating a clear buy signal at the early August low; it’s now back on sale. So, what are the signals we’re getting from other short-term models, and how are we trading this market? Have a look at today’s Daily Risk Appetite Gauge publication for details on all of that.

What are the key events and macro data that we’re watching closely this week? Well, all eyes are really on non-farm payrolls, which are coming out on Friday. We also have ISM Manufacturing tomorrow, ISM Services, and ADP on Wednesday. Today is Labor Day; markets are closed in the US and Canada. Later this week, we have a policy decision from the Bank of Canada.

That was your morning market hit. Do follow us on YouTube—search under Shortview Trading. Join us on Twitter, LinkedIn, and/or Facebook. Thanks for listening!

FIG 1: NASDAQ100 futures candlestick shown with its 50 & 200-day moving averages

FIG 2: Philly SOX futures candlestick shown with its 50 & 200-day moving averages

FIG 3: Bitcoin price shown with its 50 & 200-day moving averages

FIG 4: Fine Ounce futures candlestick shown with its 50 & 200-day moving averages

FIG 5: Implied Fed rate cuts (Aug '24 vs Dec '26)

FIG 6: US Dollar (DXY) vs Longview medium technical scoring system

FIG 7: S&P500 Equity Indices vs avg. 14d RSI of S&P500's 24 industry groups