Software sector sends early signal of a market pullback
iShares Software ETF $IGV pulled back from a negative divergence pattern, with a bearish engulfing candle
U.S. stock market proved the bears wrong, looking for a collapse from the Tariff related trade-wars and Israel-Iran conflict. It had an amazing V-shaped recovery from the April 7th low (from a sharp decline of 21.4% in $SPX from February 19th high), with Nasdaq-100 ETF QQQ 0.00%↑ climbing 38.7% and iShares Software ETF IGV 0.00%↑ climbing 45.5%.
The software sector iShares ETF IGV 0.00%↑ daily chart printed a bearish engulfing candle yesterday, covering the range of the past four trading days, while pulling back 2% after forming a topping pattern with negative divergence in RSI and MACD (lower highs).
Nasdaq-100 ETF QQQ 0.00%↑ also seems to be setting up for a pullback, with clear signs of negative divergence (lower highs in RSI and MACD as it printed three successive higher highs in price).
The strongest industry in the Technology sector is Semiconductor, where the VanEck ETF SMH 0.00%↑ rose over 69% from April 7th low. Daily chart shows a bearish rising wedge, with negative divergence in RSI (lower highs), and also seems primed for a pullback.
In terms of potential catalysts for the pullback, in addition to Tariff tensions (latest being President Trump threatening 35% tariffs on Canada and doubling the default tariffs from 10% to up to 20% for most countries), earnings season kicks in full gear with bank stocks announcing next week and then we have June CPI data on July 15th and PPI on July 16th.
A.C.