Following a soft session for stocks, in which the Nasdaq 100 clawed its way back from a 1.6 percent drop to close the day less than half a percent lower, here's what Evercore ISI technical analyst Rich Ross will be watching for on Friday.
1. Semiconductor slip
It's been a miserable week for semiconductor stocks. The S&P 500 industry group has fallen by more than 5 percent in the past week, and three S&P semiconductor stocks – Advanced Micro Devices, Lam Research, and KLA-Tencor — have fallen by more than 10 percent. Still, the group is up by 42 percent over the past year.
Tech "has been the best-performing sector, until just recently where it's become the worst-performing sector over the past week," Ross said Thursday.
Going forward, "I see ongoing weakness in those semiconductors and technology, which will lead to a bigger summer seasonal pullback here in the ," he added. "So watch those semiconductors — we've seen weakness since last Friday. If we go out on another low note, it sets us up for an extension of those declines into next week."
2. Rate rout
The 10-year Treasury yield continues to press lower, rising only slightly on Thursday from the seven-month low that it hit on Wednesday despite a Federal Reserve rate hike.
"You'd like to see a [move] to the upside to give rise to that reflationary story which has come under pressure," Ross said.
If rates manage rise, it will indicate that investors are becoming more optimistic about economic growth and consequently the prospects for a pickup in inflation.
"So let's watch those rates to see if they can move a little bit higher to give us confidence in the market and in the economy," Ross instructed.
3. Crude crumble
The 10-year yield isn't the only thing that's falling. On Thursday, WTI crude oil's $44.46 settlement price was its lowest of the year, according to FactSet data.
On Friday, "I'll be watching the ongoing collapse in crude oil," Ross said. "We took out another key level at the $45 level; the trend is down, and the chart appears broken."
"Further weakness below that big, round number at $44 would set the stage for a test of $40 this summer," he added. "It's not good for energy, that's not good for anyone — except maybe the airlines," which are large consumers of oil.