The tech industry is about to have a religious experience. It's over. The COMPQ chart is topped-out on a long-term (think months and years) basis. Just think, all those years of upside joy will now be replaced with choppy, downward moving pain for months and years ahead. The Nasdaq Composite, and especially the Nazzy 100, are tech-laden indexes. Thus, if tech (think FAANG stocks and semiconductors) is doing well, the COMPQ and NDX move ever higher. The pop in biotech stocks recently also account for some of the recent two-month rally. Of course things work in reverse as well. A pull back in tech stocks will tank the COMPQ and NDX.
The chart is interesting since it likely calls the demise of the tech industry as it currently functions. There will be likely mass layoffs coming and all you smart programmers will begin to realize you will be working for less money. If you are a young person and your parents and others admire your knowledge and wiz-bang use of technology, and you plan to have a lucrative career in technology, it likely will not happen. It may happen but competition will be fierce.
Keystone is a chemical engineer among his many past career paths, and has watched the boom and bust cycles in the engineering business for the last five decades. During great economic times, the engineering projects are numerous and engineers, managers, computer-aided drafters, and the companies make lots of bucks. Then a recession hits every few years and whammo. Most folks are then in the unemployment line. Then the recovery begins, the engineering work ramps up again, and everyone becomes fat, dumb and happy again. Rinse and repeat. The tech industry will likely morph into a similar boom and bust cycle.
Once many tech workers are out of work, you will see wages in all tech fields drop. People become desperate and are willing to work for any amount just to have a job again. Workers do not ask for raises because they know the boss is going to tell them that he has 10 people knocking at his door daily that want a job. The tech industry will likely be far different than it is; the most notable development will likely be lower wages across the board. Thus, if you are basing your years ahead on big bucks in the tech industry, take another look at your numbers and perhaps decide on a modified path.
The COMPQ topped-out last year on a long-term basis with the rising red wedge, overbot conditions and universal negative divergence with the chart indicators. It was all over but the crying. And cry they did as price stabbed the 50-mth MA, now at the 7007 palindrome. The Federal Reserve began printing money like madmen in March. Fed Chairman Powell promises "limitless" support for the markets. Of course he does. He serves the wealthy class. The global central banker largess creates the big rally off the March low. More central bank goosing plain and simple. It's not rocket science. The central banks have sent stocks higher for over 11 years since former Fed Chairman Bernanke began dropping money from helicopters in March 2009.
There was no reason for the COMPQ to come back up to test the highs. For the technical reasons above, it was over. However, the central bankers are the market and will keep goosing stocks to protect the elite privileged class that own massive equity portfolios. Now that price is back up to a matching high area, the drastic negative divergence is striking. Price has no strength at all.
A spankdown is set to begin on the monthly basis which will drag the tech sector lower for months, and perhaps several years, ahead. You are witnessing the maturation of the tech industry. The green circle in 2016 shows the Tweezer Bottom created by the Federal Reserve right when the stock market was about to crash. Many of you long-time viewers of the blog will remember those times as Keystone described the action in real-time. The green line shows the power of the Federal Reserve and other global central bankers. It is impressive. They can goose markets at will and it is occurring again right now.
In September/October last year, the stock and money markets almost froze-up which would have been a catastrophe but the Fed stepped in to save the day again. You see the tail of the candlestick tap the 20-mth MA right when the Fed stepped in to save the day again. Going forward, the 50-mth MA support will be key since price bounced from there in 2011 and a couple months ago. Just think, price will revert back to the mean in the coming years which means that the COMPQ will print below that 200-mth MA, currently under 4K, at some point in the future.
The ADX shows that the rally is NOT a strong trend higher. The strong trends higher were in 2014 and 2015, back when Keystone called the May 2015 top, and from late 2017 into 2019. The ADX is down at 19. If the upside rally was strong, the ADX would be above 30 right now and closer to 40. Note the selling volume in March, very strong, compared to the buying volume the last two months.
The Aroon green line is overbot which will lead to a move lower at some point. The red line was oversold leading to an up move. Both indicators point to weakness ahead. If the negative cross occurs (red circle), it will be officially over for the tech sector. Make your decisions now since you do not have a lot of time. The XLK ETF, the tech sector, is the exact same analysis as the Nazzy above. You can bring on long-term shorts (monthly basis) in XLK going forward.
If you hold on to all those tech stocks such as the FAANG's and chips, good luck to you, you will regret it looking back a year from now perhaps with the tickers worth about 50% of what they are now. If you are long tech, it is prudent to begin scaling out completely and bringing on shorts for a very long-term move lower; you may have only 1 to 4 weeks to carry out this task before the real downside fun begins. After that, the COMPQ will be falling like a rock with tech industry workers realizing that their career path may not be all it is cracked up to be. Humorously, in a few years time, a plumber will likely make a higher salary than a programmer so consider a plunger for a career path instead of a keyboard. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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