Hey There Income Hunters,
China recently opened a regulatory can of worms on their Big Tech firms, but it could enhance their economy in the long run.
And it may also have a big impact on the US.
Well, tighter regulations on Big Tech may become a global phenomenon
Let’s face it, an open and free internet is a tinderbox waiting to ignite as more and more data piles in.
That includes data that governments worldwide would like to keep private.
The pandemic drove this point home as every national government became suspicious and closed their border.
Yet, big tech companies need cross-border growth and global expansion. But back home in the US, our government needs and wants to bring manufacturing and productivity back home.
This will become a main theme as we reset the American economy …
New, innovative technologies are becoming more of a national security issue. That means governments will take more control of their distribution, putting long-term pressure on Big Tech valuations.
A New ERA of Government Control
The pandemic put the Fed and the government in total control.
And they are embracing it.
Expect them to seek additional control in the years ahead, though that hasn’t led to boom times historically.
For decades, the US experienced the upside of a regulatory light economy.
Notice the industrial production gains the US enjoyed during the 30-years of light regulations and supervision over the banking system and corporate America …
SPDR Select Sector Fund Industrial Sector ETF (Ticker: XLI)
XLI features an excellent representation of the Big Tech firms that may continue to be more tightly regulated as the tech war with China heats up …
XLI is an ideal trading vehicle for speculating on potential moves by the US government as they engineer a manufacturing rebirth for the US economy.
XLI Long-term Technicals
Notice the monthly chart below showing the 12-year uptrend in XLI during the 30-year period of Fed independence and bank deregulation …
During this run there was only one major correction, which was caused by Covid in March 2020
XLI recently crossed into overbought territory and has crossed back below. This is a good signal for XLI to potentially roll over and correct towards the 50-day moving average.
The best case is for XLI to stay in consolidation within this upper $100 to $105 range …
XLI Short-term Technicals
In the short-run XLI is testing the 50 DMA on the daily chart. If it breaks this threshold ($103) on higher volume, it would trigger a move just below $100 at a minimum and possibly down to $96, which is the 200 DMA.
The Fed is doing everything it can to keep the tech rally going, but the administration is at odds with J-Pow on this …
Janet Yellen and co. are hell-bent on correcting wage inequality and increased regulations on banks and Big Tech ….
The call to action is to set up bearish strategies on XLI on a rally back to 105 or a failure below 103 …
Bring It Home
Keep an eye on the macro factors abroad and how they affect the response at home.
China is the straw that stirs the drink right now and our government is focused on stemming the Chinese ascendancy.
Policy moves that affect your trading will reflect that.
Live and Trade With Passion My Friends,