Tech stocks are back in the lead: Are inflation fears behind us? | chart watcher

A weaker-than-expected jobs report gave direction to the stock market, making it a nice giveaway ahead of the 150th Kentucky Derby. Job growth slowed and the unemployment rate soared to 3.9%. If this trend continues, the market could price in two more rate cuts this year.

This week’s price action gives the impression that the stock market is still uncertain and can’t decide which direction it wants to go. It’s unclear whether Friday’s moves will be enough to push markets higher.

As this news spread, stock market indices rose. The Dow Jones Industrial Average ($INDU) and S&P 500 ($SPX) have reached their 50-day simple moving averages. (SMA) did not close above that level, however. The Nasdaq Composite ($COMPQ) rose above its 50-day SMA as several technology stocks rose. However, the index did not show much upside.

Technology takes the lead again

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The daily chart of the Technology Select Sector SPDR ETF (XLK) below shows a recent breakout of the downtrend. It will be interesting to see if XLK can break the 50-day SMA resistance.

Chart 1. Daily chart of XLK. The ETF has recently broken a short-term downtrend, but a break above its 50-day SMA is important.Chart source: StockCharts.com. For educational purposes.

The return to the technology sector shows investors remain interested in technology stocks. It may have helped spark interest when Apple (AAPL) reported better-than-expected earnings. Apple’s stock price has suffered a steep decline, and it may now be turning around.

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Apple’s price shows strength after a significant gap following its earnings report (see chart below). StockCharts Technical Rankings (SCTR) scores (top panel) are higher and are now below 50. relative strength index (RSI) is also close to the 70 level. These are the stocks to add to the ChartList.

Chart 2. Apple soars after earnings report. Will Apple’s stock price gain have enough momentum to continue rising?Chart source: StockCharts.com. For educational purposes.

Shares of Nvidia Corp. (NVDA), Microsoft (MSFT), Amazon (AMZN), and Meta (META) are trading higher. If you’re looking to add more tech stocks to your portfolio, it’s a good idea to follow up on the upside before taking the plunge.

big picture

The market has largely recouped its losses this week, but overall stock indexes have failed to break above resistance levels. Although there was an upward trend early in the trading session, it stalled and remained relatively flat for most of the trading day. Anyone who has watched the market knows that it was like watching paint dry all day. It’s Friday and investors may not want to add to their positions, especially since the market has appeared to be in correction territory this week.

The Dow gapped early in trading but held its 50-day SMA. The S&P 500 showed a bullish trend but also maintained its 50-day SMA. The Nasdaq Composite appears to be the most bullish of the three, having broken above but remained above its 50-day SMA.

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Bond prices also stagnated. A look at the daily chart of the iShares 20+ Year Treasury Bond ETF (TLT) shows that bond prices rose but did not move significantly for most of the trading day.

Chart 3. Daily chart of TLT. Bond prices rose on Friday but still have a long way to go before they start trending upward.Chart source: StockCharts.com. For educational purposes.

Good news: The CBOE Volatility Index ($VIX) is back below 15 levels. This indicates that investors do not necessarily need to be fearful and that the market did not disappear at the close.

There won’t be much economic data next week. There are some track records to keep an eye on, but the big chunk is in the rearview mirror. Markets may continue to remain indecisive next week. We’ll have to wait. Now might be a good time to take a break from thinking about the stock market and focus on watching the derby.

weekend wrap up

• The S&P 500 closed at 5,127.78, up 1.26%, and the Dow Jones Industrial Average closed at 38,675.88, up 1.18%. The Nasdaq Composite Index rose 1.99% to 16,156.33.
• $VIX was down 7.97% at 13.51.
• Best performing sector this week: Utilities
• Worst performing sector this week: Energy
• Top 5 Large Cap Stocks SCTR Stocks: Super Micro Computer, Inc. (SMCI); Vistra Energy Corporation (VST); Vertiv Holdings (VRT); MicroStrategy Inc. (MSTR); Coinbase Global Inc. (COIN)

On the radar next week

• Several Fed Speeches
• Earnings reported on Saturday include Berkshire Hathaway (BRK/B), BioNTech (BNTX), Walt Disney (DIS), Palantir Technologies (PLTR), Duke Energy (DUK), and Uber (UBER).

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.