As Goes Technology, So Is Likely To Go The Market
In our previous April 19th update, we pointed out that the benchmark S&P 500 (SPX) was positioned just below its September 2018 all-time high of 2941, and said this was an important decision point from which the US broad market’s next significant directional move — up or down — was likely to begin.
We also pointed out that the NASDAQ 100 Index (NDX), which represents market-leading technology stocks, was also simultaneously testing its October 2018 all-time high of 7701, and said
“…how NDX resolves this test of major resistance is likely to be a coincident — if not leading — indication of whether the 2019 US broad market advance continues its torrid pace into the summer or begins an overdue corrective decline.”
Chart 1 below, which is taken from this morning’s Keys To this Week report (access requires subscription), shows that NDX has since closed above its old 7701 high, actually for the past 9 sessions. Moreover, despite a very weak opening today, NDX looks as though it will post its 10th close above it today.
As long as NDX. which represents technology, continues to lead and outperform SPX, which represent the broad market, the 2019 US stock advance is likely to continue.
That being said, we also fully understand that the US is in the 10th year of a bull market, and that the average length of a bull market is only about 4.5 years. We also know that the yield curve has been flattening for almost 2 years, and that a flattening curve suggests that the prescient, forward-looking bond market is getting nervous about the economy.
Amid these conditions, we remain cautiously optimistic but are watching key support levels just below the market — as well as key market internals like investor asset flows, market breadth, and others — every single day so we are fully prepared and ready to protect our clients’ capital when the historically overdue correction inevitably occurs.
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