Tech Sector Near All Time Highs Going into 2024 Presidential Election

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We are in the middle of an important week.

Financial markets don’t like uncertainty. That could be because people are what makes the market move and if they base what to do with their capital with information that is known. But with earnings season – which we are in right now for Q3 and economic reports due out this week I can understand the pullback in the Dow and the consolidation of the S&P 500.

The one area of the market that is still holding up strong is the tech-laden NASDAQ.

That could be because many investors have been adding to their stake of these companies due to a FOMO point of view, (FOMO being a Fear Of Missing Out).

That may be coming to a head though, with the NASDAQ and its tracking ETF I spotlight with a technical analytical view on the next page, the QQQ, trading at or near all-time highs.

This week is going to be a most telling week for this index as 4 of the major’s in tech, Alphabet, Inc. (GOOGL – Meta Platforms Inc. (META) -Amazon.com Inc. (AMZN) – and Apple Inc. (AAPL) have either reported or are due to report this week.

Even if they report better than expected their may be a gap up and sell the news situation as investors may want to book profits before the 47th President is announced.

I see things as volatile once the decision is announced as we could see a pop and drop (buy the rumor / sell the news) or FOMO kicks in as folks continue to put their money to work based on the winner and if that winner is deemed good for the markets.

Invesco QQQ Trust – (QQQ)

This is a Year – to – Date candlestick chart on the Q’s (a tracking ETF for the NASDAQ). 4 of the Magnificent 7 or Mag 7 tech stocks report or have reported this week.

The concern I have is the Q’s are already at or near all-time highs, which could lead to profit taking kicking in and dropping this index into a bit of a correction even if earnings for these major tech stocks beat earnings expectations.

Technical Perspective: There is an ascending triangle pattern formation for the Q’s. If it breaks out higher, a move the width of the triangle is possible.

If it breaks down lower any number of prior pivot lows could be a support, if not even a retrace to the low of the triangle is possible.

Two Key Economic Reports for the Week ending November 01, 2024

Aside from earnings being front and center, there are two economic reports due this week as well.

Thursday we get the PCE report.

PCE is the Personal Consumption Expenditures (PCE) Price Index.

This is an economic indicator in the United States that measures changes in the prices of goods and services purchased by households. Not only is it viewed as a measure of inflation it is used by the Federal Reserve as its primary gauge of inflation.

I mentioned the Federal Reserve uses the PCE as its primary inflation target, so know the Fed aims for a 2% annual increase in core PCE as this indicates to them economic stability.

Friday we get the lates U.S. unemployment report – this time for October.

As of September 2024, the unemployment rate was at 4.1%, which was a slight decrease from the 4.2% reported in August and that was compared to July’s rate that peaked at 4.3%.

Compared to the previous year, when unemployment was around 3.8%, this increase in unemployment indicates there has been some softening in the labor market even though we’ve seen continued jobs gains.

Additional data due in the reporting is job creation and wage growth across various industries, along with indicators for both short- and long-term unemployment rates.

These details are relevant to the Federal Reserve since they monitor these employment trends to aid them in decisions on adjusting monetary policies.

Toms Tools – Straddle Finder

Options traders usually try and find a security to trade an option on based on which direction they believe the underlying security of that option will trade – higher or lower.

But what if one doesn’t have a bead on which direction the security will trade.

What if they believe the security has just as good a chance of trading higher or lower based on an upcoming event, announcement, or technical chart pattern.

They can consider an option strategy called a Straddle: A straddle is an options trade where one can buy to open on the same order ticket a Call and a Put option at the same strike price and same expiration date.

It costs more than an option of either type all by itself, but in doing so provides the option trader of this strategy a chance at making a profit so long as the underlying security makes a move higher or lower.

Also note the underlying has to make a large enough move higher or lower so that either the ‘call or put’ option in the trade becomes profitable enough to cover the cost and more.

I used my scanning tool called Straddle Finder (Login > Searchers > Single Strategy > Straddle Finder).

I am searching on the QQQ since its technically at a juncture it could break out of its triangle pattern one way or the other.

I am also searching a percent to double scan where I can see if there is a straddle that has a chance to double – the lowest % needed to do so and for 20-90 days out. 20-90 days out since a new President’s first 100-days tends to be where a significant move happens.

Here is the page for the search parameters used in this scan.

The info requested to scan is in there and click Search gets the below Straddle.

The two ‘light blue,’ horizontal lines on the Risk Graph are the break-even lines – where the security needs to be to break even.

Any move higher or lower than either of those two lines are and the time frame prior to expiration is where profitability resides.

I gave you the technical view of QQQ and both scenarios of where Q’s might go if it breaks either way.

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