Matt Weller, CFA, CMT
Faraday Research
Remember the so-called "Trump Trade"? Both in terms of political developments and price action, it seems like November 8th was about a half-decade ago, not just five months ago. When it comes to the stock market, traders rushed out to buy industrial, material and financial stocks, while selling health care and technology stocks.
The bearish health care thesis was fairly straightforward, given the Republicans' promises to "repeal and replace" the current health care law, but the explanations for the drop in tech stocks was always a bit more tenuous. Some traders argued that Trump's tough-on-immigration stance could deprive technology companies of the highly-skilled foreign workers on H1-B visas, while others (ourselves included) believed the post-election pullback in tech stocks was simply caused by investors taking profits the strongest names in their portfolios to chase "The Next Shiny Thing," namely financial and industrial stocks.
Regardless of the explanation for the initial drop, the tech sector has come roaring back of late. Though still far from the lofty "Tech Bubble" peak at the start of the millennium, technology stocks recently hit their highest levels relative to the broader stock market in 15 years.
Technology stocks have hardly been slacking on an absolute basis either. As the chart below shows, the technology sector ETF (XLK) made a run at its Tech Bubble peak near 54.00 earlier this month, and after a pullback, XLK is showing signs of bouncing off its 50-day MA so far this week:
Given the strong relative and absolute bullish trends in the tech sector, we'll continue to look for buying opportunities in the days and weeks to come. Top holdings in the sector include AAPL, MSFT, FB, GOOGL, T, INTC, VZ, CSCO, V, IBM, and ORCL, all of which are in our US equity universe.
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
Editors’ Picks
EUR/USD fades below 1.1900 amid sudden USD demand
EUR/USD has quickly reversed modest intraday gains on Thursday, struggling to retain the 1.1850. The Greenback benefits from both, risk aversion, and market rumours suggesting Russia is analyising returning to the US Dollar system.
GBP/USD change course, nears 1.3600
GBP/USD trimmed most of its intraday gains and approaches the 1.3600 threshold. Tepid United Kingdom data released earlier in the day adds to Sterling Pound retracement, as the flash estimate of the Q4 Gross Domestic Product posted a modest 0.1% advance in the three months to December.
USD/JPY consolidates around 153.00 favoured by lower Fed easing bets
USD/JPY steadies around 153.00 after hitting two-week lows at 152.25. A strong US Nonfarm Payrolls report provided some support for the US Dollar on Wednesday. The Yen remains on track for a 2.6% weekly rally, boosted by Takaichi's victory at Sunday's elections.
Editors’ Picks
Gold plummets towards $4,900 as market players run into the USD
Gold plunges in the American session on Thursday, down over $150 a troy ounce in little less than an hour. Wall Street's collapse seems to be behind the ongoing US Dollar renewed strength, with the tech and the housing sectors leading the slump.
EUR/USD fades below 1.1900 amid sudden USD demand
EUR/USD has quickly reversed modest intraday gains on Thursday, struggling to retain the 1.1850. The Greenback benefits from both, risk aversion, and market rumours suggesting Russia is analyising returning to the US Dollar system.
GBP/USD change course, nears 1.3600
GBP/USD trimmed most of its intraday gains and approaches the 1.3600 threshold. Tepid United Kingdom data released earlier in the day adds to Sterling Pound retracement, as the flash estimate of the Q4 Gross Domestic Product posted a modest 0.1% advance in the three months to December.
LayerZero Price Forecast: ZRO steadies as markets digest Zero blockchain announcement
LayerZero (ZRO) trades above $2.00 at press time on Thursday, holding steady after a 17% rebound the previous day, which aligned with the public announcement of the Zero blockchain and Cathie Wood joining the advisory board.
A tale of two labour markets: Headline strength masks underlying weakness
Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.
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