Big Tech Monthly Report

With the second quarter over, there’s a new opportunity to assess the outlook for the third quarter and key levels for investors and traders to watch.

The main question Wall Street analysts are asking themselves is whether big technology stocks will continue to dominate in the second half of the year. The top sectors identified last November have performed well in the first half of 2024, with the Communication Services Sector (XLC) up 18.5% and the Technology Select Sector (XLK) up 17.9%.

These two sector ETFs contain large tech stocks that have led the market average throughout the year. Year-to-date, NVDA has posted a massive 149.5% gain against 2.^and META topped the list with a 42.7% increase. Amazon.com is up just over 27% and Microsoft is up just over 19%. Apple, Inc. (AAPL) hit a low of $163.85 in April and is up 9.7% year to date.

QQQ is up 17.3% in the first half of the year and SPY is up 15.2%. As I noted in last week’s discussion of A/D line divergences, to find true divergences you need to compare the unweighted A/D line to the unweighted market average. The S&P Equal Weighted Index ($SPXEW) is up just 4.1% year to date.

Monthly charts and technical analysis are paramount in determining the outlook for these stocks and market averages. Invesco QQQ Trust (QQQ) had a very strong month, up 6.5% with a closing price well above the highs of the past three months. The monthly starc+ band is currently at $502.95 and can be easily tested. The monthly uptrend (line a) is at $411 and the 20-month uptrend EMA is at $390.41.

QQQ starts the new month above the pivot at $471.40 and the new Q pivot at $459.79. This support is about 4% below the June close. I am looking at the monthly NASDAQ 100 up/down line, which last generated a buy signal in early 2023. It continues to make new highs after overcoming the 2021 high (line b). The 21-month WMA of the A/D line is rising and is also positive. On-balance volume has surged in early 2024, breaking out of the trading range (line c) and making new highs along with the price.

Amazon.com AMZN also ended the month up 9.5%. I think this is a positive technical development as most AMZN holders are trading below the June closing price. AMZN ended the month at $193.25 with a new monthly pivot of $189.67 and a quarterly pivot of $186.47. This creates a strong support band in this zone.

Relative performance RS measures how Amazon is performing against the S&P 500. RS has risen above the WMA in Q1 2023 and remains positive. On-balance volume has also confirmed the price movement, overcoming the resistance of line b to break out to a new high. Monthly starc+ band is at $210.51.

Meta Platforms (META) has been raising red flags for the past few months as it traded above the monthly Starc+ bands in February, March, and April. It closed June at $504.22, which is much closer to the Starc+ than the Starc- bands. The new monthly pivot is $498.29 and the quarterly pivot is $483.40. It has major chart support dating back to mid-2021 at $381.98, line a.

Monthly technical analysis remains positive, but a pullback is possible and no strong sell signal has yet emerged. RS bounced off the breakout level, line b, and started to rise in June. OBV is also showing positive movement, but has not yet fully surpassed the February high.

Microsoft Corp. (MSFT) rose another 7.7% last month to close at its highest price for the year. This is $27, or just over 8%, below the monthly stark+band of $483.53. MSFT’s June pivot is $437.35 and its quarterly pivot is $430.38. MSFT is currently 3.8% above its Q pivot and is finding stronger support near $374.

RS analysis identifies MSFT as the market leader in early 2023 (see arrow) and it has resumed upside after testing the rising WMA. This positive move is supported by the OBV, which closed at a new high in June and crossed the breakout level, line b.

Apple Inc. was noted for triggering a monthly Doji buy signal after the May close. It gained further momentum in June, rising 9.6% on the strongest monthly volume this year. This close above the high of 199.80 confirms that APL’s correction is over. The monthly Stark Band was tested in June at 219.34 in July, with the completion of the trading range targeted in the 2:30 to 235 area. AAPL’s monthly pivot is at $207.76 and the Q pivot is at $198.30.

July could be a key month as monthly technical analysis suggests that AAPL may be poised to lead the market higher again as RS closed slightly above its weighted moving average. A similar movement is seen with the OBV, which needs to rise above line b, a long-term resistance, to propel the price higher.

A rocket ship stock this year, NVIDIA Corp (NVDA) has had a wild few weeks, including hitting a peak of $140.76 on June 20th in response to new high price targets. It then closed at $130.78 before consolidating. The consolidation low so far is $118.94. NVDA has traded above its monthly starc+ bands every month so far in 2024, which is pretty extreme.

NVDA starts a new month and quarter Under The monthly pivot is at $125.41 and the QPivot at $130.33. Support on the monthly chart is at the March high of $97.39. Even stronger support is at the April low of $75.60. Monthly technical analysis supports the price movement, with RS hitting a new high in June and so does OBV. Volume in June increased as it was higher than the April and May figures.

So what’s next for NVDA? It formed a cross last week, so it might be sold off. The daily technical indicators are negative, but the weekly survey is trending downwards but still positive. I would like to look for more positive technical indicators before taking a new position.

Looking at the current DTS readings, there are several showing negative 4-hour readings, but NVDA is the only one showing a negative DTS. If the market corrects, we can expect to see a few more negative DTS signals. If these develop into negative 3_DTS signals, it will increase the likelihood of a more severe correction. Alternatively, a new positive 4_HR_DTS would be an encouraging sign.

We recommend investors hold onto their positions in big tech companies until there are more serious signs that the trend is changing.