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Double bubble (part 2)

 In Newsletter

Issue 137
Assets Covered: E-mini Technology Sector Futures,  S&P/TSX Capped Information Technology Index Futures 

 

The NASDAQ is trading at all-time highs above 11,000 for the first time this week. Things are so frothy that even Kodak has – somehow – been transformed from a boring, bankrupt photographic film company into a dynamic pharma company on the back of a single government loan. Kodak seems to be falling back to earth – for now – but how far can techs extend?

 

We may be here for some time, yet we seem to be witnessing a divergence from fundamentals in tech stocks. Tech billionaire Mark Cuban sees eerie similarities with the dot com era, although he says the rally could continue for years. In the CNBC discussion, Cuban says “I had my 18-year-old niece asking me what stocks she should invest in because her friends are making 30% per day.” 

 

Maybe it’s just the Robinhood traders, but while US tech stocks continue to rally, it’s notable that China’s ChiNext tech stock index peaked in mid-July. The ChiNext has been trying to regain the mid-July high, but it just can’t seem to make it. So, with the Silicon Dragon potentially on its heels, is the Western tech bubble about to burst?

 

We do think there’s a pullback on the horizon. It’s likely that tech stocks decelerate this month and into September. As we enter Q4, we expect tech to strengthen again, so the strength in global tech stocks isn’t quite finished yet.

 

E-mini Technology Sector Futures (XAK1) Forecast until December 2020

E-mini Technology Sector Futures (XAK1) Forecast until December 2020

CI Futures generated this chart. Book a demo to see it in action.

 

 

Taking a closer look at techs, we expect Canada’s tech indices slowing in the near term with with some recovery coming in early Q4.

 

S&P/TSX Capped Information Technology Index Futures (SXH1) 

S&P/TSX Capped Information Technology Index Futures (SXH1)

CI Futures generated this chart. Book a demo to see it in action.

 

 

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