Treading Lightly

This post continues on 2 recent posts:

  • Tech: Good, Bad, Ugly” (Jul 7) - Many tech stocks/ETFs are either facing resistance, struggling to hold breakouts, or still in large drawdowns.

  • Potential inflection point nearing” (Apr 13) - US stocks showing bearish divergences with breadth and Emerging markets, while defensive sectors are leading. I made the argument for bitcoin underperforming gold (since then, BTC has fallen almost 50% relative to gold).

There’s still some warning signs in the market that have me holding a little cash.

Trend

US Stocks vs. 20yr Treasury Bonds, Monthly. Back to highs set 21 years ago. It wouldn’t be surprising to see a pause here.

SMH, Weekly. As mentioned in the last post, semi’s are struggling to hold a recent breakout. Next week will be key.

KWEB, Monthly. This China tech ETF broke an important 3yr support level last week.

Divergences

Extending on China, emerging markets have been diverging from US stocks since Feb.

US stocks are also diverging from HYG:TLT ratio. Junk vs. Treasury bonds are a measure of risk-appetite.

The Nasdaq Composite is diverging from it’s cumulative advance-decline line. As the Nasdaq has been climbing, fewer stocks have been participating.

IGV, Weekly. This software ETF is displaying weakening momentum (measured by RSI).

Again, the next couple weeks will be key.


Important DisclaimerThis blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.