As we have been seeing another day of green with $SPDR S&P 500 ETF Trust(SPY)$ and $Invesco QQQ(QQQ)$ continuing small rally into Tuesday (25 March). This marks three green days in a row which could be seen in the last one month worth of trading.
But if we were to look closer, there are some big resistance above on the SPY and QQQ, which might see the bears coming back for some disruption, I will be sharing more of that later in this article.
But first, I would like to go through what the latest consumer confidence index which were released yesterday (25 March) mean for the market.
Consumer Confidence Dip Show Fears Of Tariffs Still Present
If we looked deeper into the consumer confidence index which was released on Tuesday morning at 10am ET, the dip show that there is still rising fears if tariffs which have the consumer confidence to a 4-year low.
I would see this report as quite bad in terms of consumer outlook for the near-term, even though the market still go green, this might have investors question whether these negativity have been priced into the markets already.
If you have read the article by reuters which does a good job in giving a deep look into what does the consumer confidence mean. I will not delve into that in this article, but I would like to assess if we are seeing a possible rotation into big tech.
Performance Of SPY and QQQ -> Possible Big Tech Rotation
We have SPY up by 0.24% and the QQQ up 0.57% and the heat map of the sectors did not look that bad, we can see that most of the big tech names are in the green except for the semiconductors which is lagging behind on Tuesday (25 March).
The financials are doing normal with a 0.46% gain, healthcare saw a retracement falling by 1.29%, consumer staples was dragged down by $Wal-Mart(WMT)$, losing 0.94%, as we also see lots of value names that was popular with investors over the last two weeks start to pull back.
We are now seeing a big rotation back into big tech if we look at the all the defensive sectors which have many investors piling into for fear of tariffs, but their performance have been unwound if you look at the 1 week performance. We are seeing outperformance in the big tech names once again.
Real estate and utilities have come down by losing 1.13% and 1.36% respectively. There is also a mixed market move as we are seeing communication services to the upside which is led largely by $Alphabet(GOOGL)$ and $Meta Platforms, Inc.(META)$ which have a good run on Tuesday.
So we can see that consumer defensives like real estate, healthcare and utilities. These are supposed to be anti recession trade when fear is high, they are supposed to be going up but yet we are seeing a very quick pivot back into growth.
So did the market priced in maximum fear at least in the short term, as we are starting to see some of the sectors that got dragged down most in the past month came back and start to show little signs of life.
But the fear and greed index still show that the fear is at 29 which is not at the lows of extreme fear that we saw one week ago but still markets largely in fear conditioned territory. We are also in a period of weak seasonality coming into the end of March.
That might be why we are seeing a bounced after we saw the market bottomed relatively early in March. This might be the seasonality path to maybe what market is looking forward to 02 April, the date for tariffs also known as the Liberation day.
Can SPY Continue To See A Bounce In April ?
As market looks forward to 02 April, making it a very political headline driven market right now, so what investors might be seeing are future expectations which is the same to what was like two weeks ago.
I think as investor, we might want to look at how fear and greed index evolves over the next few days and weeks, as we want to see if there will be a common seasonality we are going to see as we enter April.
Now if we look at the SPY, the daily uptrend is still present, and the bulls are still in control but the resistance is very close above 575 to 585. If we look back for the past week, the balance is looking quite well, as we can see it is presenting only 40% retracement now into resistance.
But if the bulls start to lose the daily uptrends over the next few days into 02 April tariff day, we could see a weekly lower high, then the bulls would need to play defence into the area near 551 to 565.
With weak bounce we have experienced these three days, the likelihood of going to the lows remain quite high, so we need to monitor and slowly add when time is right and not chase the market into resistance especially not before 02 April deadline.
We need to be cautious with our trades while monitor and be patient to wait for the market signal on the high quality stocks.
QQQ Nice Rally But Will It Continue?
We are seeing the QQQ in a very nice rally now, and the daily uptrend looks promising but any move lower we might be looking at a higher low which could be anything above 473.
So the bulls might be looking for the higher low for possible trend expansion, but the resistance above 500 to about 595 was there to support the bulls for a few times.
So QQQ is now running into the 26 EMA but it is good to see that QQQ has closed above the 200-day MA, which the SPY also has cleared the 200 EMA.
We need to understand that QQQ has only a 38% bounce so if the level got rejected and the daily uptrend is lost, then we might be set for a daily downtrend which would give the bears the chance to hit the lows again.
So now the bulls need to really defend the level from 468 to 485 to prevent that from happening.
This Week Economic Data - Little Normalization In Inflation Expected?
This week we will be expecting one of the biggest economic data that Fed is looking which is the GDP. Though this is a final estimate, we have gotten the estimate for Q4 over the past three months, this data would give us a final tally for GDP.
On Friday we will also be expecting the Fed preferred gauge of inflation, the core and normal PCE, so if the report turned out to be like the CPI and PPI reports we got, most likely we will be seeing little normalization in inflation, while not expecting a very big upside move, but these are the two important days to watch.
Summary
So based on what we have seen so far, looks like there is a possible rotation into big tech, considering how the sector performance have shifted from defensive into growth, then focus now is on the big tech related sectors, while defensive sectors like healthcare, real estate and utilities are showing signs of decline.
But we still need to be cautious and patient while we head into 02 April, as market bounce is rather weak and we are not seeing a confirmed signal of a rally ahead.
Appreciate if you could share your thoughts in the comment section whether you think we can see a stronger bounce next week as we near 02 April.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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