It’s been a volatile past few weeks, and so much has changed.
There is a lot to say about the bank crisis, but one of the craziest parts about it is the way that it’s caused the 10-year to tank, the real estate market to pick up, and tech stocks to rally, all at the same time.
What I’m seeing is a major sector rotation that fundamentally shifts where I’m looking for investments and trades.
Last year, the was the relative weakness index, and the S&P was stronger, held up by energy, staples, banks, financials, and healthcare. But, with the fall in crude, the bank crisis, and the shift from defensive back into tech, I’m seeing signs that the S&P is ready to take the next leg lower while the Nasdaq is going to continue to diverge and trade higher.
So, am I still bearish on equities long term? Yes and no. The S&P still demonstrates bearish weekly chart patterns, and the macro condition supports more downside in that index. However, the Nasdaq is coming back to life.
The bank crisis has ironically set the stage for a significant tech comeback. While initially, I was looking for a short-term rally in tech last time we talked, what has happened since then is the rally was explosive, and the put/call is still so elevated right at crucial resistance zones.
What that means is that there are still many caught short, and any kind of continuation higher could easily break overhead resistance and cause a FOMO-induced buying rally.
MSFT, AAPL, and the semis (SMH, NVDA, AMD) are leading the way higher, and where these names go, the Nasdaq follows. Yes, there is still resistance, but with the break lower in TNX, pick up in housing, and rotation out of energy, financials, and staples, there is money that can be put to work.
Another great point towards continued tech strength is seasonality. I love trading bullish tech prior to earnings…and it’s almost April. Seasonally, MSFT and AAPL, in particular, close higher in April.
Since the Nasdaq was so beaten down last year, there is some significant upside. Investors have been afraid of tech and by the way should still be afraid of trashy tech (Dotcom AARK money-losing stocks), but mega-cap tech is not going anywhere.
I think investors should look at rotating back into the Nasdaq, watch the ten-year, and keep an eye on the bank crisis. Yes, we may get a black swan. But this bear market is also getting old.
I’m also eyeing housing because, with rates falling, I have seen ‘under contract’ pick up a lot on Zillow (Z) and Redfin (RDFN).
Traders can trade short squeezes and focus on mega-cap tech going into earnings. Look for companies crushing it the past few quarters despite market conditions.
Also, short energy. Crude is falling off a cliff and has more room to fall. XLE can be shorted as well.
Want to learn more? I joined Charles Payne to discuss this and more. Check out the link by clicking on the image below!
What do you think? Does this tech rally have more legs? Let me know on Twitter by clicking here!