Volatility Strikes Again: Tech Stocks Lead a Market Rally Despite Early September Slumps

Technical Stock Market Briefing for Day & Swing Traders
| By Harry Boxer, Technical Market Analyst

The major U.S. stock indexes rallied last week, posting weekly gains ranging from around 3% to 6% that were nearly equal in magnitude to the previous week’s steep losses.

Much of September’s volatility has been driven by the information technology sector, which dropped 7% to start the month before gaining back 7% in the latest week.

Market swings have increased in recent weeks, as anxiety of a slowing economy and persistent inflation is sparking pullbacks. But a broader view shows that despite sell-offs, stocks have delivered very strong gains and sit near record highs.

On August 5, the Dow fell 1,034 points.
It then rose 1,062 points over the next six days.

Almost another 2,000 points were added over the ensuing few weeks, followed by a drop of 1,000 points from August 29 to September 6. Then on Wednesday of last week, the Dow had an intraday swing of 910 points (rising by that amount in a matter of a few hours).

The point is that a closer look at recent market volatility may feel a bit nauseating.

Specifically, the early-August sell-off was sparked by a jobs report showing a slowdown in hiring growth that spurred a chorus of recession calls. The late-August decline was a similar reaction to a weak monthly manufacturing report. And last Wednesday’s half-day slump was the response to the consumer price index (CPI) report that showed a stall in the pace of falling inflation.

Despite the fact that markets have displayed a bit more anxiousness of late, that shouldn’t be interpreted as a sign the bull market has run out of gas. It’s actually been encouraging to see that episodes of rising recession fears have not caused much market downside follow-through.

Although the markets have logged strong gains over the last two years and currently sit within shouting distance of their all-time highs, the major indices now are poised at or near potential formidable overhead technical resistance.

The next few days could be critical in assessing whether or not they can extend and possibly spike up here or back off to test lower support

In any case, closely monitor the technicals and “Trade What You See, Not What You Think”