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Trade War Takes Its Toll on Tech Stocks

Major Moves 

The trade war between the United States and China escalated last Friday when President Trump officially put Huawei Technologies on a trade blacklist, and the U.S. stock market is feeling the effects today.

The technology sector – which has been the top-performing sector on Wall Street for most of 2019 – led the S&P 500 lower today as Alphabet Inc. (GOOGL) – the parent company of Google – and Qualcomm Incorporated (QCOM) have moved to cut off Huawei’s access to their technology.

This is troubling for traders because China is a huge growth center for most technology companies, and traders are hyper concerned about slowing revenue and earnings growth rates right now. If these technology companies can’t demonstrate that they are going to continue producing strong growth, traders aren’t going to continue to pay premium prices for their stocks.

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You can see by the sea of red on the S&P 500 heatmap below just how devastating this news has been to the technology sector today. The bigger the loss for the day, the brighter the red becomes within the individual stock’s block.

Today’s biggest losers in the Technology sector were Keysight Technologies, Inc. (KEYS), Western Digital Corporation (WDC) and Activision Blizzard, Inc. (ATVI) – which were down 8.92%, 6% and 5.99%, respectively.

S&P 500

On Friday, I talked about the gravestone doji that had formed on the S&P 500 and highlighted that it must be followed up by a bearish candlestick to be confirmed. Well, we got a bearish move today that confirmed Friday’s candlestick.

Interestingly, the S&P 500 didn’t drop far enough to challenge the support level at 2,813.46 that we have been watching for the past week or so. Instead, the index bounced up off of its lows for the day to close at 2,840.23, just below where it opened for the day.

This is a crucial consolidation range for the S&P 500. If the index can remain above support in the short term, it has an excellent opportunity to continue its longer-term uptrend into the summer.

If the index drops below support, the S&P 500 will complete a head and shoulders bearish reversal pattern – with the left shoulder forming in late March, the head forming in late April and the right shoulder forming in mid-May. A bearish move like that could send the index down to challenge longer-term support at 2,630 this summer.

We’ll have to wait and see what happens during the next two weeks.

Risk Indicators – Rare Earth and Strategic Metals

REMX holds shares of rare earth mining companies like China Northern Rare Earth Group High-Te, China Molybdenum Co Ltd and Xiamen Tungsten Co Ltd – which are listed on Chinese exchanges – and luka Resources Ltd, Lynas Corp Ltd and Pilbara Minerals Ltd – which are listed in Australia. The only U.S.-listed company in REMX’s top-20 holdings is Tronox Holdings PLC (TROX).

REMX shot 5.98% higher today and is likely to continue climbing if Beijing officially announces an export ban. If that happens, watch for the technology sector to take a hit on Wall Street.

Bottom Line – Important Inflection Point

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About Amy Harvey

Amy R. Harvey writes forStartUps Sections In AmericaRichest.

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