For the chartists out there, BMO’s technical guru Mark Steele has a few observations based on the recent move in the Growth/Value trend, and what to do expect going forward.
First he notes, that as he said last week, “we’d keep an eye on the Largest 10 technology stocks, from our early June note (Leadership Can Be Fickle), and in the update you can see AAPL falling from the tree – Exhibit 1.
Steele also updates the “fantastic trend” of growth over value, which also broke down on Friday – Exhibit 2. In the chart he shows that “only a 2% draw down was need to signal a breakdown.” That signal came on Friday.
BMO then notes that its relative strength breath reading for technology peaked at “Fantastic” a month ago (see Blinded by the Light), and took a 2nd leg down on Friday – Exhibit 3.
Lastly, for those still overweight the sector, note the panic signaling in implied volatility on Friday. According to BMO, “one should expect a rebound. We believe one should be paring back to neutral on that opportunity.”