The charts are showing signs that tech could pull back in the near term

CNBC

3 days ago

The growth trade has gone almost parabolic since the April lows with a 40% rise in less than four months. I think we're in a secular bull market and should be considerably higher one year from now. Near term, however, I also think a pullback is possible. Should you care? I don't know. It depends on your perspectives and objectives. But if a 5% pullback is something you consider actionable, then a hedge in the Nasdaq might make sense. One investor's bull market is another investor's bear market. Trading and investing is all about your own personal perspectives and objectives. There is not one proper way to invest and speculate in the markets. You have to decide what best meets your objectives. If you're not sure how to answer those questions, please consult a financial advisor. It doesn't make you ignorant. We have actual scientists as clients - much smarter than I - who need help answering those questions. We're trained for this. Looking at the Invesco QQQ Trust , which tracks the Nasdaq-100, you'll see a sharp rise from the April lows. The Relative Strength Indicator (RSI) put in a commensurate rise with the QQQ price through May. In June, QQQ broke through the former $540 double top resistance level, which is now acting as support and a target level should the pullback I'm about to describe starts to manifest. However, when the $540 ceiling was being penetrated, the RSI did not confirm with a push to new highs indicating that momentum, or rate-of-change, was waning. Think of a ball being thrown in the air. Towards the apex of the throw the ball continues to move higher, but at a slowing rate of change until the direction changes and gravity takes over. In my short-term Active Opps model for our more active clients, I plan to bring in a short hedge via the ProShares Ultrashort QQQ ETF (QID) to protect gains in our core holdings. QID is trading around $24.61 and will look to exit the trade at a loss if it trades below $24.25. Remember, as QQQ goes up the QID goes down. Wednesday kicks off the heart of megacap growth earnings with Alphabet, ServiceNow and Tesla reporting. It gets busier next week with more earnings and next Federal Reserve meeting. Looking at some other macro markets with a potential impact on the stock market, I'm seeing gold (left chart) threatening a break through $317 resistance and the 20 year+ treasury bond ETF TLT acting a little 'bottomish' with a possible inverse head and shoulders with attendant RSI divergence. Gold and bond moving higher here is a cause for concern. Some profit taking before the real heart of earnings season after a historic 40% run in less than four months seems reasonable and relevant to our shorter-term managed model Active Opps. In the bigger, longer-time frame portfolios we managed, this possible pullback is noise and not something to be bothered with. I believe we're still in a secular AI-driven technology bull market that should be significantly higher one year from now. -Todd Gordon, Founder of Inside Edge Capital, LLC We offer active portfolio management and regular subscriber updates like the idea presented above . DISCLOSURES: Gordon owns GOOGL, NOW, TSLA personally and in his wealth management company Inside Edge Capital. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.