After last week’s first back-to-back weekly decline since April, buyers have returned US equity markets, and tech shares with newfound optimism. Is this a buy-the-dip opportunity, or the start of another phase for Wall Street shares, one that could be heading lower?
Today’s robust move higher could be based on optimism fueled by Pfizer’s (NYSE:PFE) CEO who late last week said the pharma giant’s coronavirus vaccine, which is currently in late-stage trials, could be rolled out to Americans by the end of the year. As well, market analysts remain optimistic about US stocks, believing they just went through a statistical correction.
We’re not so sure. Fundamentally, there are two primary geopolitical factors currently moving the markets: the pandemic and a brewing cold war between the US and China.
Regarding the first point, we still don’t have a vaccine. And when one finally emerges, there’s an argument being made that it would be logistically impossible to send it to most of the world.
As for the second point, there are too many elements keeping the relationship between the two largest global economies tense—uncertainties about Oracle’s (NYSE:ORCL) newly minted partnership with ByteDance’s TikTok for its US operations, which could still be scuttled by President Donald Trump, as well as additional as yet unforeseen trade and global supply chain mishaps that could emerge.
Technically, the tech index’s uptrend has been put to a serious test.
The first signal of a reversal was the powerful Evening Star, whose final candle erased five days worth of gains, on the highest volume since June.
The second indicator occurred when prices fell below their rising channel since the March lows. The third sign was triggered when the price attempted a push higher, but fell away from the bottom of the rising channel, and the fourth red flag emerged when the price established a descending