• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock Rate-Sensitive and Big Tech Names Strengthen as Market Breadth Gets Clobbered
Stock

Rate-Sensitive and Big Tech Names Strengthen as Market Breadth Gets Clobbered

by May 15, 2023
by May 15, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

Interest rate-sensitive and big tech stocks are seeing positive money flows. but the market’s breadth is suddenly crashing as bond yields test their recent lows.

You know trading is dull when stock traders talk about the bond market. But that’s where the action is these days, other than the Nasdaq 100, which no one pays much attention to anymore. So as the sell in May and go away crowd starts chanting their usual seasonal song, the contrarian in me is slugging more coffee then ever in order to home in on whatever is working, which is limited these days.

On the macro end, even perma-bulls (are there any left?), along with those who don’t look at bond charts, can see the economy is slowing. Last week’s data was clear enough:

A slowing rate of rise in CPIA similar slowing rate of rise in PPI, with the processed good for intermediate demand component posting a negative growth rate for the yearJobless claims hitting the highest level since they bottomed out in September 2022

Moreover, jobless claims rose the most, with California, Massachusetts, Missouri, Texas, and New York. Tennessee and North Carolina, two other sunbelt states, joined Texas, coming in at 15 and 16 on the list. California, Massachusetts, and Texas all have heavy tech company presences.

Watching the Sunbelt 

Of course, I’m keeping a close eye on the sunbelt for two reasons. First, the sunbelt’s economy has done well over the last few years, as the migration to them has bolstered housing-related industries. Second, this is where the job creation has been of late. Thus, if jobs start to falter in the sunbelt, the odds of a recession will rise.

In Texas, the Austin area has been hit hard as the layoffs in the tech sector have extended there. Even big players like 3M (MMM) are shedding real estate in the city to go along with the phasing out of 500 jobs. MMM’s woes are not difficult to understand, as its global strategy and heavy presence in China, where the post-COVID economy is still having some problems, have become its Achilles’ heel.

The stock continues to hover near its recent lows and is showing little sign of perking up. All of which adds up to bond traders licking their chops as they see inflation slowing, rising jobless claims, and a Federal Reserve which may be forced to stop its rate hikes, once and for all.

From a trading standpoint, it’s useful to keep some money in bonds and related areas of the market. I’ve recommended several ways to do that on my service. You can have a look with a free trial.

Bonds Holds Near New Yield Lows

The bond market is betting on a slowing economy. And last week’s data helped that viewpoint. On the other hand, bond traders aren’t fully convinced yet, as the 3.3% yield continues to be the floor on yields for now. A decisive move below 3.3% would likely lead to a further decline in yields.

Certainly, that would be a positive for the bond market, but the weak data that would push yields to those levels would be significant, almost certainly weak enough to strongly suggest a recession.

As I’ve noted here for several weeks, the long-term relationship between the U.S. Ten Year Note yield (TNX), mortgage rates (MORTGAGE), and the Homebuilder sector (SPHB) remains intact, as the recent fall in yields and mortgage rates has again led to a rise in the homebuilder sector.

For an in-depth comprehensive outlook on the homebuilder sector, click here.

Interest Rate-Sensitive Sectors and Big Tech See Positive Money Flows

Meanwhile, traditional interest rate-sensitive sectors in the stock market are confirming the currently falling bond yields, and are waiting for a break below that key 3.3% yield in TNX.

In addition to the move into interest rate-sensitive areas, you can see selective money into big tech. The Invesco QQQ Trust (QQQ), home to Microsoft (MSFT), Apple (AAPL), and the rest of the big tech posse, is near a major breakout, with investors pricing in layoffs and cost-cutting measures as potential profit boosters for the companies. Moreover, there is the current AI-related buzz that is also fueling interest in the sector.

The traditionally interest rate-sensitive utility sector (XLU) is also answering the bond market’s siren call. XLU is trading well off of its lows and is on the verge of a breakout as it tests the key resistance level near $70. This is where the 200-day moving average and a large Volume-by-Price bar (VBP) are hunkered down. A move above this area would be bullish, and would likely happen if TNX breaks below 3.3%.

On Balance Volume (OBV) and Accumulation Distribution (ADI) are both trending higher, confirming the bullish money flow.

You can see a similar technical picture, albeit to a lesser degree, in the real estate investment trusts (IYR). The situation in real estate is mixed as commercial real estate (CRE) is struggling while the multifamily apartment and residential sector is doing much better. I described the changing landscape in the REIT sector in my latest Your Daily Five video.  In fact, I have just added three REIT plays to my portfolio. Get the details with a free trial to my service here.

NYAD Breaks Down

The New York Stock Exchange Advance=Decline line (NYAD) rolled over at the end of last week with a nasty-looking break below its 50-day moving average. It looks headed for a test of its 200-day moving average. A sustained break below the 200-day line would be very negative for the market.

In contrast, the S&P 500 (SPX) went nowhere. The index has remained in what has become a familiar trading range, between 4100 and 4200 for several weeks as the heavily weighted big-tech stocks, which are also in the Nasdaq 100 index (see below) are holding things up. On Balance Volume (OBV), however, looks to be turning lower, which means sellers are starting to increase in number. Accumulation Distribution (ADI) remain very constructive for SPX as short sellers pare positions.

The Nasdaq 100 Index (NDX) remains in an uptrend. The index closed above 13,400, extending its breakout above 13,200. I’m watching what happens to OBV and ADI in the short term, however. If they both turn lower, this rally may be ending as well.

VIX Holds Steady

The CBOE Volatility Index (VIX) has been stable lately trading well below 20. This is a positive for the markets, as it shows short sellers are staying away.

When VIX rises, stocks tend to fall, as rising put volume is a sign that market makers are selling stock index futures in order to hedge their put sales to the public. A fall in VIX is bullish, as it means less put option buying, and it eventually leads to call buying, which causes market makers to hedge by buying stock index futures. This raises the odds of higher stock prices.

Liquidity Remains Stable Despite Rate Hike

The market’s liquidity is moving sideways as the Eurodollar Index (XED) remains below 94.75, but did not make a new low after the Fed’s rate hike. That’s a positive for now.

A move above 95 will be a bullish development. Usually, a stable or rising XED is very bullish for stocks. On the other hand, in the current environment, it’s more of a sign that fear is rising and investors are raising cash.

To get the latest up-to-date information on options trading, check out Options Trading for Dummies, now in its 4th Edition—Get Your Copy Now! Now also available in Audible audiobook format!

#1 New Release on Options Trading!

Good news! I’ve made my NYAD-Complexity – Chaos chart (featured on my YD5 videos) and a few other favorites public. You can find them here.

Joe Duarte

In The Money Options

Joe Duarte is a former money manager, an active trader, and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best-selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.

The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.

To receive Joe’s exclusive stock, option and ETF recommendations, in your mailbox every week visit https://joeduarteinthemoneyoptions.com/secure/order_email.asp.

You Might Also Like
  • Sector Spotlight: Monthly Charts Suggest Downside Risk is Limited
  • Is This a Federal Open Market Committee Shake and Bake?
  • MEM TV: Easy Way To Uncover Best Candidates for These Markets
  • Larry Williams: Dow 40k, Cycle Analysis, and Lessons Learned
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Where Are We? Can We Say This Is A Bull Market?
next post
Planned Parenthood calls for court packing, term limits in new judicial reform package

You may also like

Top Ten Charts for August: Two Bearish Turnaround Plays

August 23, 2024

The Largest IPO In 2 Years Launched Last Week –...

September 16, 2023

Three Technical Tools to Minimize Endowment Bias

February 10, 2025

Never Short a Dull Market; AI is Sexy, But Everyone...

May 29, 2023

Bullish Moxie Setups Working

April 15, 2023

Seasonality Points To Higher Prices NOW

November 24, 2023

This Stock Hit a 52-Week High — And It’s Still...

November 20, 2023

Two Consumer Stocks Popping to New Swing Highs!

June 27, 2024

Campbell Soup: Warm Comfort for an Ailing Economy?

March 10, 2023

Art and Science: 3 Key Ratios in the Markets

March 24, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,630 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,185 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    How to Find the Best BUY...

    July 27, 2023

    Scanning for Strong Reversals via Bullish...

    May 31, 2023

    Fibonacci Says Upside to SPX 4300

    May 20, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here