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Global technology ETF and mutual funds had $3.768 bln worth of inflows last week, according to Goldman Sachs. From a contrarian perspective, this is particularly negative in the short-term. Adding to worries, the Nasdaq 100 is led by the strong performance of just a few stocks and is now in overbought territory, looking at the Relative Strength Indicator. 

Markets have had a good run so far this year, led by tech giants. Markets have cheered the enormous cost-cutting initiatives amongst tech giants and pivot to a focus on profitability. Monday marked the lowest volume for the S&P 500, as investors await to see the results of Microsoft and Alphabet in after-hours on Tuesday. Tech typically leads the market (higher or lower), so investors are waiting to see where is tech headed next. Going into this earnings there are 3 important elements: (1). 75% of firms are beating earnings so far (positive).  (2). Bearish positioning in S&P 500 futures is enormous (positive). (3). Volatility has come down by a lot (Some will say this is positive suggesting a bull market, but it also means it leaves markets more vulnerable (slightly negative).

Fundamentals for technology names continue to strengthen amid continued weak expectations and depressed levels of investor positioning. While Tesla took a hit as it told investors it will forgo profitability for greater market shares, IBM reported strong earnings. In semis, TSMC said it believes it is passing through the bottom of the cycle in the second quarter and its business in the second half of this year should be stronger. Keep an eye out for next week's most important earnings for US Big Tech.

While the US economy is finally seeing 'cracks' in its jobs picture, US Treasury yields continue to react downwards as traders forecast the weakening US economy will see lower interest rates. This downtrend in yields should act as support for valuations, particularly in technology names. On the earnings front in tech, Q1 earnings in 3 weeks should be decisive, but really the news flow continues to be encouraging. Should there be a more 'material' drop in markets, tech should be better able to withstand it. Investors should be eying to buy dips and look for Big Tech names that are still lagging but are showing encouraging signs (Google, Amazon). This post is written for an educational purpose of the Trading Game, and does not constitute financial advice.

US PCE, the Fed's favorite measure of inflation came softer than expected, a positive for the US central bank as it relieves pressure to continue raising interest rates. Stocks reacted positively with the S&P 500 zooming 0.4% higher.