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Mish Schneider

How we know big tech is at a crossroads

In this article, Forrest Crist-Ruiz, assistant director of trading research and education at MarketGauge.com, explains how big tech may be poised for a big drop.

On Tuesday, the Nasdaq 100 (represented by the Invesco QQQ Trust [QQQ]), the iShares Russell 2000 ETF [IWM], and SPDR S&P 500 ETF [SPY] gapped lower, followed by a rally.

One of the most important indices to gap lower was the tech-heavy QQQ index.

This is important because big tech companies were the first to lead the rally in the wake of the pandemic back in March last year.

With tech leading the charge higher, it has also been a cause for worry if it were to weaken.

If so, it could be signalling that overall market strength is lessening, or fear from other things like inflation is gaining weight.

With that said, the QQQ also broke an important support area created not only by the 50-day moving average (DMA) but also from consolidation in price action going back to this March...

Similarly, the small-cap Russell 2000 index broke its 50-DMA.

However, IWM’s price action is much sloppier, with it repeatedly trading around the 50-DMA for over a month.

Additionally, the SPY and the SPDR Dow Jones Industrial Average ETF [DIA] are holding a bullish phase with prices trading over their 50-DMA.

Therefore, the QQQ is key as it is sitting in a very pivotal area.

If it can clear back over its 50-DMA at $325.90 and hold, this will look good for the coming week.

On the other hand, if the QQQ can’t clear back over the 50-DMA, stay cautious as fear could trigger a greater selloff.

This article was originally published on MarketGauge. With over 100 years of combined market experience, MarketGauge's experts provide strategic information to help you achieve your investing goals.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

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