Technology stocks are rebounding from a weak August as investors target a widening swath of companies like Intel and Western Digital.

The S&P 500 rose 2.5 percent between Friday, August 25, and Friday, September 1. But technology stocks rallied 4.4 percent, their biggest weekly gain in over two months. The surge came at the end of the sector’s worst month of the year (-1.7 percent in August). That may suggest buyers are returning to the group after a brief pause.

While megacaps like Apple (AAPL) and Nvidia (NVDA) rose last week, the big moves were in less-prominent names. Storage makers like Western Digital (WDC) and Seagate Technologies (STX) were the top performers in the S&P 500 on optimism about NAND flash memory prices. Dell Technologies (DELL) jumped to a new record high after Artificial Intelligence (AI) fueled demand for servers.

Intel (INTC) — another 1990s blast from the past — rallied after confirming it was on pace to meet or exceed guidance.

Companies outside major indexes also jumped. Identity-management firm Okta (OKTA) and biotech software maker Veeva Systems (VEEV) reported strong quarterly results. E-commerce player Shopify (SHOP) announced a new sales partnership with Amazon.com (AMZN).

Apple, Alphabet

Despite the shift of interest to smaller companies, at least least two of the “Magnificent 7” had important news.

Alphabet (GOOGL) jumped to a new 52-week high after announcing new AI functionality at its annual Cloud Next event. AAPL bounced after confirming September 12 as its product event. (New iPhones are widely expected.)

Chinese technology stocks also gained after officials in Beijing took steps to support their stock market. Homebuilders climbed as interest rates eased. Materials rebounded from a four-week slide. Energy, the only positive sector in August, advanced as crude oil futures (@CL) hit a nine-month high.

Utilities and consumer staples fell last week. Health care rose by just 0.1 percent. Those safe havens continue to struggle as investors favor riskier assets.

Dollar General (DG) was the worst-performing member of the S&P 500 after missing estimates and cutting guidance. Walgreens Boots Alliance (WBA) hit a 14-year low after CEO Rosalind Brewer resigned.

Economic Data and the Fed

Several data points last week suggested economic growth is easing. The most important was Friday’s non-payrolls report:

• Unemployment rose to 3.8 percent, above the 3.5 percent estimate and the highest level since February 2022.
• Hourly earnings increased 4.3 percent, less than the 4.4 percent expectation.
• Payroll growth from the previous two months was revised down by 110,000 jobs.
• The participation rate increased by 0.2 percentage point to 62.8 percent, the highest since February 2020.

ADP’s private sector payrolls report and consumer confidence were lower than forecast. The growth in second-quarter gross domestic product (GDP) was also revised down 2.1 percent from the preliminary reading of 2.4 percent. Another report from Challenger showed that announced job cuts tripled between July and August.

The data could argue against further interest-rate hikes by the Federal Reserve. (See the screenshot of CME’s Fedwatch tool above.)

Charting the Market

The S&P 500’s bounce in the last two weeks may help confirm the uptrend that began earlier in the year.

First, the index made a higher monthly low versus June. Both of those troughs were also above the peak from August 2022, which suggests new support has developed above old resistance. That’s potentially consistent with an uptrend.

Second, TradeStation data shows that more S&P 500 members are now above their 20-day moving averages than their 50-day moving averages. Similar crossovers in January, March and June preceded upward moves in the index.

Third, Cboe’s volatility index, or VIX, ended last week at its second-lowest closing level since January 2020. That may reflect less fear.

Fourth, sector performance is skewed toward risk appetite. Industries like energy and technology, which benefit from a strong economy and investor confidence, are gaining. Meanwhile, safe havens like utilities and consumer staples are lagging over most time frames.

In the near-term chart watchers may expect resistance around 4528, which was a low on July 20 and July 27.

The Week Ahead

This week is relatively quiet. It’s shortened by Labor Day, which pushes crude-oil inventories from Wednesday to Thursday.

Monthly vehicle sales are due today, which may have some impact on automakers. Zscaler (ZS) reports earnings after the closing bell.

The Institute for Supply Management’s manufacturing index is tomorrow morning. The Fed’s Beige Book report on economic confidence follows in the afternoon. C3.ai (AI) and Gamestop (GME) announce quarterly results.

Thursday brings initial jobless claims and crude-oil inventories. Nothing important is scheduled for Friday.

Next week is more active, with AAPL expected to launch new iPhones and key inflation data due. The following week brings a big Fed meeting.

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Uber Technologies has been steadily trending higher, and options traders seem to think the move will continue.

Two large transactions appeared in the ride-sharing stock yesterday. Both were bullish, although one involved significant risk and the other was conservative.

First, the riskier trade:

• 11,000 August 42.50 calls were sold for $5.60.
• 11,000 August 35 puts were bought for $0.11.
• 11,000 September 50 calls were bought for $2.22.
• 11,000 September 42.50 puts were sold for $1.23.

Volume was below open interest in the August contracts but not the Septembers. That suggests a bullish combination trade was rolled from one month to the next. Here’s how it might work:

Calls fix the level where investors can purchase a security. They typically gain value when shares rise. Puts lock in the selling price, so they can appreciate to the downside. This strategy sells puts (which can be highly risky for retail investors) and uses the cash received to buy calls.

If the stock rises, the puts sold short will lose value and the calls will gain. That seems to have already happened in this case, which is why they exited a profitable position in August and moved to September. Making the adjustment let them collect a net $4.50 per share, while keeping them exposed to further upside.

Covered Call

Here’s the more conservative trade:

• 20,612 July 32.50 calls were bought for $15.15.
• 20,612 January 32.50 calls were sold for $16.71.

Volume was below open interest in the July contracts but above open interest in the Januarys. That suggests an investor owns roughly 2 million UBER shares and had previously sold the July 32.50s as part of covered call strategy. He or she collected a net credit of $1.56, which they’ll keep as long as the stock remains above $32.50. It can drop more than 30 percent without them enduring a loss, thanks to the covered call strategy. The investor has relinquished any further gains to the upside in return for that safety.

UBER fell 0.63 percent to $47.11 yesterday, but is up 48 percent in the last three months. It’s been rallying since earnings, revenue and guidance surprised to the upside on May 2. The next results are due before the opening bell on August 1.

Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See Characteristics and Risks of Standardized Options. Visit www.TradeStation.com/Pricing for full details on the costs and fees associated with options.

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Apple has surged this year as Wall Street anticipates a new iPhone cycle and growth opportunities in India. But yesterday options traders looked for a pause.

Check out this large transaction that occurred shortly after Monday’s open:

• 20,000 4-August 180 puts traded for $1.66.
• 20,000 4-August 170 puts traded for $0.54.
• Volume was more than 5 times open interest at both strikes, which suggests a large investor executed a put spread.

There are two possible explanations for the trade.

Credit Spread

The more bullish possibility is that the 180 puts were sold and the 170s were bought. That would be a put credit spread, letting the investor receive $1.12 now. He or she would keep that payment as profit as long as AAPL stays above $180 through expiration.

They’d have to buy 2 million shares for $1.80 below that level.

This strategy could make sense if the investor likes AAPL but thinks it needs to pause. They stand to collect some money up front, while also programming an entry if a lower level is reached. The $180 price point is also near the 50-day moving average and a peak from March 2022, which could make them potentially attractive entry points.

The credit spread additionally includes a hedge to the downside with the 170 puts. Those limit potential losses in the event of a bigger decline. Earnings are scheduled for the afternoon of August 3 (shortly before expiration) which could trigger volatility.

Bearish Put Spread

A second potential explanation is that the investor purchased the 180 puts and sold the 170s. That would be a bearish put spread, leveraging potential a drop to $170. In that case, he or she would have paid $1.12 and stands to make 793 percent from a plunge to the lower price.

The trades work because puts fix the price where a security can the sold, which can make them gain value when stocks decline. Investors can also sell puts to generate credits in spreads.

AAPL ended the session down 1.1 percent at $188.61. It’s up 45 percent this year and hit an all-time record high of $194.48 on June 30.

Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See Characteristics and Risks of Standardized Options. Visit www.TradeStation.com/Pricing for full details on the costs and fees associated with options.

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Alphabet has been on the sidelines since a big rally in May. Is it time for traders to think about more upside?

The first pattern on today’s chart is last August’s peak around $122.43. GOOGL chopped on either side of the level for three weeks but has mostly stayed above it. Last Wednesday’s pullback brought prices back to the line and it’s stayed there since. Has old resistance become new support?

Second …

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Semiconductor stocks have been moving lately. Today’s chart focuses on memory-chip producer Micron Technology.

The first pattern to consider is the level around $64.30. MU peaked near this price in November, January, March and April. A breakout followed in mid-May followed by a pullback on Monday. Will buyers step in near the previous high, looking for old resistance to become new support?

Next, you have …

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Major technology stocks like Apple and Microsoft jumped on quarterly results. Will peer Saleforce.com make a similar move?

Marc Benioff’s provider of cloud-based marketing software is up 49 percent this year after a sharp selloff in 2022. It has paused over the last month, but some traders may see positive signals on the chart.

First is the $200 price level near the March 31 peak. CRM has made incrementally higher lows since then to produce an ascending triangle. That’s a potentially bullish continuation pattern.

Second is the gap higher on March 2 after quarterly profit and revenue beat estimates. It also issued strong guidance and increased its stock buybacks.

The news fits into a bigger narrative of Silicon Valley companies renewing their focus on profitability. CRM bowed to pressure from activist Elliott Investment Management and reduced headcount, following similar moves by MSFT, Meta Platforms (META), Alphabet (GOOGL) and Amazon.com (AMZN).

The software company also embraced the newest growth theme by saying on March 7 it would add generative artificial intelligence (AI) throughout its products.

CRM Calls

The next earnings report is estimated for May 30, but options traders could be looking for the stock to move sooner.

Call volume hit a six-week high of 40,305 on Monday, according to TradeStation data. The busiest contracts were the weekly calls expiring this Friday:

• About 10,000 12-May 205 calls were purchased, mostly for $0.35 to $0.39.
• Some 6,800 12-May 200 calls were purchased, mostly for $1.70 to $2.94.
• Volume was more than 5 times open interest in both strikes, which suggests new buying.

Calls fix the price where investors can buy a security. They can appreciate when a stock rallies but will expire worthless if the shares remain below the strike price.

CRM briefly hit a new 52-week high of $200.50 but eased back to close Monday up 0.16 percent at $197.90.

Overall option volume was almost twice the daily average, with calls accounting for a bullish two-thirds of the total.

Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See Characteristics and Risks of Standardized Options. Visit www.TradeStation.com/Pricing for full details on the costs and fees associated with options.

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Apple clawed to a six-month high last week. Is it done or will prices continue higher?

The first pattern on today’s chart is the price level around $156. AAPL peaked there on March 6 and bounced there yesterday. Some chart watchers could think …

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Stocks face a confusing mix of positives and negatives, but the biggest story could be an unexpected surge in the Nasdaq-100.

The technology-heavy index rallied 5.8 percent between Friday, March 10, and Friday March 17. In absolute terms, it was the biggest weekly gain since November. But compared with the broader S&P 500’s 1.4 percent bounce, it was the Nasdaq’s best showing in over 20 years (according to TradeStation data).

Two catalysts drove the move. First, the selloff in financials like First Republic Bank (FRC) and Credit Suisse (CS) pushed down interest rates and reduced expectations for Federal Reserve hikes going forward. Second, excitement about artificial intelligence (AI) drew investors back to major technology firms like Microsoft (MSFT), Advanced Micro Devices (AMD) and Nvidia (NVDA).

It’s Dr. Jekyll-and-Mr. Hyde moment. Bears see financial contagion, inflation, and a potential recession. But on the other hand, bulls can argue that the bank meltdown will slow inflation and defang the Fed as a risk to the market. Either way, this week could be pivotal as traders brace for another central bank meeting and watch for evidence of financials stabilizing.

The first headlines Sunday night looked positive with UBS (UBS) agreeing to purchase CS for a fraction of its value. The deal, encouraged by central bankers around the world, was intended to prevent a systemic meltdown like 2008. Therefore traders are likely to watch for signs of stability or further volatility.

The other big event is on Wednesday, when the Fed announces interest rates and guidance on future policy. CME’s Fed Watch shows futures anticipating a single 25-basis point hike this week, with no further increases. That’s a big change from earlier in the month, when markets anticipated about 75 basis points of tightening by the summer.

Banks Crash, Tech Soars

Last week featured sharp differences between major sectors. Banks had another double-digit loss. Those worries about financial contagion in turn hammered economically sensitive groups like energy, materials and industrials. Airlines also slid, partially because United Airlines (UAL) warned about slowing demand.

Technology was the top-performing sector overall as investors continue to focus on AI. OpenAI released GPT-4, supporting images as well as text. Alphabet (GOOGL) released a “magic wand” functionality to automatically write in Google Docs. MSFT followed by adding ChatGPT to Office programs like Word and Excel. Those moves could make AI available to millions of users, potentially boosting the need for faster processors. Semiconductor names like AMD and NVDA surged in response.

Gold miners were the best performing group overall last week, benefiting as safe havens amid the bank meltdowns.

Charting the Market

The S&P 500 briefly turned negative on a year-to-date basis last Monday, but quickly rebounded. There are signs of prices breaking 2022’s downtrend, but without clear signs of a new bullish trend starting.

Traders could now watch to see if the index can make a higher low versus late December. They might also want to know whether it can reclaim the 200-day moving average — a potentially important indicator of long-term trend.

Sentiment is also unusually negative according to the American Association of Individual Investors (AAII). Just 19.2 percent of respondents in its latest poll described themselves as “bullish,” the lowest reading since September. That can be a contrary indicator, showing significant cash on the sidelines.

This uncertainty on the chart could increase the importance of this week’s events. Positive news from the banks and dovish signals from the Fed could make investors more optimistic, while bearish news on either front could trigger further selling.

The Week Ahead

Aside from the Fed meeting on Wednesday, this week brings a handful of potentially important scheduled events.

European Central Bank President Christine Lagarde speaks at 12 p.m. ET today. While normally she wouldn’t impact U.S. markets, the banking crisis may increase the importance of her remarks.

Existing home sales are due tomorrow, followed by Nike (NKE) earnings after the closing bell.

At 2 p.m. on Wednesday, the Fed releases interest rates and projections for future policy. Chairman Jerome Powell will speak 30 minutes later.

Initial jobless claims and new home sales are on Thursday morning.

Friday has few important events.

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Semiconductors have outperformed lately as investors get excited about demand from artificial intelligence (AI). Today’s chart considers equipment supplier Lam Research .

The first pattern is the rising 50-day simple moving average. LRCX has consolidated in a tight range around that line during the last three weeks, a potential sign the intermediate-term uptrend remains in effect.

Next, roll back the clock to …

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Most people know that technology stocks ended 2022 on a weak note. But they may not realize one group started to outperform: chipmakers.

The first pattern on today’s chart of the Philadelphia Semiconductor Index is the falling trendline along the highs of last year. The S&P 500 is currently sitting at similar resistance, but SOX has been above its respective trendline since mid-November.

Notice how it stayed on the upper side of the pattern last month. That may suggest …

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