It’s become gospel that technology is the most important sector of the U.S. stock market; after all, tech stocks have the largest weighting in the S&P 500 (~26%), and the sector outperformed all others over the last year (+26%).
The S&P 500 -- as of 1:45 p.m. Central on Tuesday, July 24, and subject to change before close -- offers daily-chart traders a miniature crash or microcosmic test of a throwback down signal. If the major swing top is near and forming slowly, as mentioned in another Jeff Greenblatt’s work today (and all of Jeff Greenblatt’s books I have read; it is an honor to write anything where he writes), then some minor down-thrust market tests could easily precede a larger drop.
Last week at this time we were working on a high that hit at the beginning of the window and, indeed, patterns started to roll over. NFLX had a terrible earnings report and got crushed in the aftermarket last Monday night. That’s fair enough. But on Tuesday it put in what is called a bullish belt hold. That’s where it gaps down but the end of the gap turns out to be the low for the day. Lots of stocks put in green bars that day. In terms of psychology, bears had to wonder if they’d ever get a break.