Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
You can access both of our platforms from a single Saxo account.
In focus: tech sector and semiconductor charts
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: The escalation of the China-US trade war has pushed the technology and semiconductor sectors lower, and investors need to be aware of support levels as well as headline risks.
On Monday, Saxo Head of Equity Strategy Peter Garnry published his outlook on the technology sector given the escalation of the China-US trade war.
Today, I'd like to take a look at the technical picture.
The SPDR Technology Select ETF (XLK:arcx) tracks the biggest tech companies in the S&P 500 index. The technical picture here looks quite similar to that of the Nasdaq 100 – no major surprise, as 35% of the ETF consists of Microsoft and Apple. Include Cisco, Oracle and Intel and the percentage rises to more than 45%
Support for XLK seems to lie around $73. A close below that area will confirm a downtrend, likely triggering a sell-off down to test support at $69.
The Relative Strength Index is currently bearish with no divergence, i.e. there is potential to another push to test support at $73.
A close above $76.50 is needed for the current bearish picture to be demolished. A close of the gap from yesterday could be the first warning that this resistance level could come under pressure.
Today, I'd like to take a look at the technical picture.
The SPDR Technology Select ETF (XLK:arcx) tracks the biggest tech companies in the S&P 500 index. The technical picture here looks quite similar to that of the Nasdaq 100 – no major surprise, as 35% of the ETF consists of Microsoft and Apple. Include Cisco, Oracle and Intel and the percentage rises to more than 45%
Support for XLK seems to lie around $73. A close below that area will confirm a downtrend, likely triggering a sell-off down to test support at $69.
The Relative Strength Index is currently bearish with no divergence, i.e. there is potential to another push to test support at $73.
A close above $76.50 is needed for the current bearish picture to be demolished. A close of the gap from yesterday could be the first warning that this resistance level could come under pressure.
As an addition to Peter Garnry’s excellent article about the US-China trade war and its impact on the tech companies https://www.home.saxo/insights/content-hub/articles/2019/05/20/are-you-ready-for-a-cold-war-in-tech let’s have a technical look at the sectors mentioned.
The semiconductors sector is a little more interesting, with the VanEck Semiconductor ETF (SMH:arcx) as our instrument of choice here (its largest holdings are: Intel, Taiwan Semi, QComm, Texas and Nvidia).
We saw a massive sell-off yesterday, with a huge gap down that totally ignored support at $104.60 to close almost directly on the 200 SMA, just a few dollars off the $99.40 support level.
The May downtrend has occurred under heavy volume compared to the uptrend from January to April – an indication of further selling pressure.
We see RSI in oversold territory but no divergence, so further selling pressure could be expected. The $99.40 level seems crucial.
The semiconductors sector is a little more interesting, with the VanEck Semiconductor ETF (SMH:arcx) as our instrument of choice here (its largest holdings are: Intel, Taiwan Semi, QComm, Texas and Nvidia).
We saw a massive sell-off yesterday, with a huge gap down that totally ignored support at $104.60 to close almost directly on the 200 SMA, just a few dollars off the $99.40 support level.
The May downtrend has occurred under heavy volume compared to the uptrend from January to April – an indication of further selling pressure.
We see RSI in oversold territory but no divergence, so further selling pressure could be expected. The $99.40 level seems crucial.
We can see how the semiconductor sector seems to “front run” the downtrend compared to the Nasdaq 100. This should come as no major surprise, as it is probably the sector being the hardest hit by the trade war. Back in April, semiconductors peaked about a week before the Nasdaq did.
Overall, markets are looking set to rebound today with futures up 06-0.7% into the New York bell.
Latest Market Insights
Quarterly Outlook 2024 Q3
Sandcastle economics
-
-
Bonds: What to do until inflation stabilises
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.
-
Equities: Are we blowing bubbles again
Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.
-
FX: Risk-on currencies to surge against havens
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.
-
Commodities: Energy and grains in focus as metals pause
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.
Disclaimer