Navigating Shifting Tides: S&P 500 Confronts Key Support Amid Tech Slowdown

In the current dynamic market scenario, the S&P 500 is cautiously approaching pivotal support levels, while the energy sector readies itself to step up as momentum wanes in the tech arena. These insightful observations come courtesy of Jonathan Krinsky, the chief market technician at BTIG, who shared his analysis with clients in a recent weekend communication.

Krinsky highlighted a significant development involving Apple, a heavyweight with a 7% stake in the S&P 500. The company has broken its uptrend, marking a notable market dynamic shift. The S&P 500, which had been riding a wave of 45 consecutive trading days above the 20-day moving average, underwent a turbulent phase last week, raising the prospect of testing vital support thresholds. While initial focus centers on the ascending 50-day moving average (DMA) at 4406, Krinsky emphasizes that the more substantial support zone lies within the range of 4200-4300.

A potential retreat to the 4200 level would signify an approximate 9% dip from recent peaks. Krinsky maintains that even if the broader upward trajectory continues later in the year, such a pullback remains within reason.

Krinsky’s cautious outlook extends to the Nasdaq, which has been propelled by its dominant tech constituents, propelling the market to an impressive nearly 17% year-to-date gain. He underscores concerns regarding diminishing momentum, particularly evident in the Invesco QQQ exchange-traded fund (QQQ), tracking the Nasdaq 100. Despite an unusual six-month streak of gains, the QQQ experienced a setback last week, breaching its uptrend and signaling a potential shift in direction.

Apple’s recent downturn – the market’s largest company by valuation is of particular significance. Krinsky points out that Apple experienced its most substantial weekly decline of the year and unequivocally broke its year-to-date uptrend. The company now faces a pivotal support examination within the 177-180 range. Krinsky suggests that failure to hold within this range could indicate a significant false breakout.

Amidst the challenges confronting major tech players, a glimmer of optimism emerges from another sector.

Krinsky highlights the energy sector, which has demonstrated a relatively stable performance year-to-date, showing hints of potential momentum. The weekly MACD (Moving Average Convergence Divergence), a trend-following momentum indicator, has transitioned into a buy signal. This transformation underscores a promising setup for the energy sector, exemplified by the Energy Select Sector SPDR ETF (XLE) breaking its year-to-date downtrend, alongside the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) also marking a breakout.

As the market landscape continues to evolve, the S&P 500 finds itself at a pivotal crossroads, with attention turning towards the emerging potential of the energy sector. The intricate choreography of market dynamics persists, as investors brace themselves to navigate the ever-shifting currents that lie ahead.