Bottom In or Dead-Cat Bounce?
As mentioned in the Weekly Compass last Saturday, when social media was flooded with posts about a potential black Monday, the $S&P 500(.SPX)$ and technology, mostly driven by semiconductors ( $VanEck Semiconductor ETF(SMH)$ ), was primed for a bounce given the technical conditions outlined in the publication.
Today's move is not surprising, and we will analyze what criteria must be considered to increase the probability of continuation following the bounce.
Now that the bounce has materialized, the prevailing question is: Is the bottom in?
However, we should perhaps rephrase the question: Is the sector rotation over?
That consideration is driven by the divergences we have witnessed over recent days, where semiconductors cratered while non-tech sectors rallied, as seen in $Costco(COST)$ $Wal-Mart(WMT)$ $Exxon Mobil(XOM)$ $Eli Lilly(LLY)$ $JPMorgan Chase(JPM)$ $Visa(V)$ while $NVIDIA(NVDA)$ $Micron Technology(MU)$ $Advanced Micro Devices(AMD)$ sold off sharply. Today, we saw the inverse: was this simply tech experiencing a technical bounce while non-tech underwent a healthy pullback?
$Technology Select Sector SPDR Fund(XLK)$ $Health Care Select Sector SPDR Fund(XLV)$ $Utilities Select Sector SPDR Fund(XLU)$ $Communication Services Select Sector SPDR Fund(XLC)$ $Energy Select Sector SPDR Fund(XLE)$ $Consumer Discretionary Select Sector SPDR Fund(XLY)$ $Consumer Staples Select Sector SPDR Fund(XLP)$ $Financial Select Sector SPDR Fund(XLF)$ $Industrial Select Sector SPDR Fund(XLI)$ $Real Estate Select Sector SPDR Fund(XLRE)$ $Materials Select Sector SPDR Fund(XLB)$
Markets are always moving - and sometimes, the best move is knowing what works for you.
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