2023 has seen a major thrust in tech names. The latest run in semiconductor and software program shares are nice examples of market thrusts. The market has cut up into completely different autos, and we’re at present driving the AI car to greater highs.
One of many instruments I like to make use of to research shares and indexes for momentum is the PPO.
Again in 2021, the $NDX index had a PPO surging to very excessive ranges on the month-to-month chart. It was the best stage in 20 years, and instructed warning. When it rolled over, it was fairly vital to respect that. The PPO turned as much as a purchase sign this month, so that appears extra bullish.
Once I take a look at the mega-cap tech names, a few of the charts are ramping up properly, like TSLA. The weekly PPO is surging, and this seems to be prefer it may run to a lot greater ranges. There may be not a restrict for the PPO, however when it rolls over on a weekly chart, it may be a clue to be extra protecting of good points.
Once I take a look at MSFT, the PPO is considerably greater in comparison with historical past. Solely in 2010 (which was after a significant backside) have we reached this stage of momentum on this century. We’re testing the prior excessive, so it is in all probability an excellent place to be cautious. Nothing improper with ready for MSFT to offer a little bit pullback.
Taking a look at NVDA, we have now a major surge as effectively. That is greater than something for the reason that flip of the century! The volatility of NVDA again in 2000-2002 gave you nice buying and selling alternatives. The true alternative was in taking income at excessive ranges. That doesn’t imply promote your inventory right here, however it does recommend having a plan for shielding income.
What it suggests to me is that a few of these charts are too prolonged for brand new positions. Be at liberty to research different mega-cap names for the place they’re relative to historical past. I had 46 charts on the $SPX with excessive PPOs, however that’s solely 10% of the index. Some are nonetheless rising, some are cresting, and a few are effectively on their approach decrease.
It is solely been one week of promoting, however it is very important acknowledge that these charts is likely to be prepared for a much bigger breather.
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Greg Schnell, CMT, MFTA is Chief Technical Analyst at Osprey Strategic specializing in intermarket and commodities evaluation. He’s additionally the co-author of Inventory Charts For Dummies (Wiley, 2018). Based mostly in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He’s an energetic member of each the CMT Affiliation and the Worldwide Federation of Technical Analysts (IFTA).