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Trends & Analysis
News
Thor shares decline despite upbeat earnings
News
Is Walmart recession-proof?
News
EUR/USD slides despite strong Germany data
News
Crude oil settles lower after surging past $82
News
Will rates ruin the S&P 500?
News
S&P 500 declines despite upbeat NFP data

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Asset Watch

Time to buy tech?

 

Thursday, July 7, 2022

Investors dropped a cyclical sledgehammer on Jul. 5, as energy, materials, and industrials were three of the four worst-performing sectors within the S&P 500. And with crude prices sinking by roughly 8%, recession fears have overtaken inflation fears, and long-term interest rates have also suffered sharp declines.

 

Since technology stocks are long-duration assets, they benefit from declining long-term interest rates. Many NASDAQ Composite companies don’t earn profits, so investors wait years for positive earnings. And since lower long-term interest rates increase the present value of those future earnings, the dynamic helps support higher prices.

Although the NASDAQ Composite has declined by more than 28% this year and has underperformed the S&P 500, could a rotation be underway?

The NASDAQ Composite’s 175 and 200-week moving averages have saved the day since 2011. So while the index dipped below both levels during the COVID-19 sell-off, it rallied soon after. The NASDAQ Composite also fell below its 200-week MA intraweek for the period beginning on Jun. 13 but managed to close the week above it. Likewise, the intraweek decline beginning on Jun. 27 also saw support materialize at the 200-week MA.

Therefore, with the index sandwiched between its 175 and 200-week MAs, support and resistance are present between 10,846 and 11,355.

However, with the index closing at 11,322 on Jul. 5, will the great rotation propel the NASDAQ Composite above its 175-week MA sooner rather than later?


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