Nasdaq Look:
The Nasdaq finished UNCH, falling short on the abundance of “Turnaround Tuesday” calls. The tech heavy benchmark was up better than 1% early on, but is sold off into the close and has ended the day in the lower half of its intraday range 4 sessions in a row. A brief interlude above its 200 day SMA last Wednesday proved futile, and that was the THIRD time beginning with 10/10 that it has undercut the line. The secular moving average is now bending lower, and as the old adage goes nothing good happens below the 200 day. Its bend reminds me of watching the pole vault in track and field competition, when an athlete brushes the bar at a lofty height and it shakes back and forth, and for a split second it looks like it may come to rest, before falling heavily to the ground. Will PRICE on the index do they same? Predictions are worthless, but the longer it trades underneath the 200 day the worse off it will be. Lets remember the line was never breached during the February and March selloffs. I personally believe we are still hearing to many bottom calls, and once they cease, which could be a long time, then perhaps a floor will begin to develop.
Software Still Shrugging off Semiconductors:
The turf war between the two dominant groups within technology continues to be won by software. The chart below is a ratio chart comparing software to the semiconductors. The PSJ trades 15% off its most recent 52 week highs, not much better than the SMH now off by 19% from its own highs. However the 200 day SMA on the PSJ is still sloping higher, something the SMH can not boast of. Their has been M&A activity in both groups, with APTI being swallowed by a private equity group this week at a hefty premium. Truth be told prior to the announcement yesterday it was on an 8 week losing streak that cut the name in half. RHT in the space of course was taken out by IBM, and TWLO grabbed SEND after trading publicly for less than one year. Semiconductors still lack the strong leaders, with the possible exception of XLNX which refuses to retreat. The highway in this group is ridden with potholes as former darlings such as AVGO, QCOM, NVDA and AMD are all lower by 21, 29, 32 and 43% from their most respective highs.
Examples:
One has to look back on the month of October and scour through names that demonstrated excellent relative strength. The chart below, of ERIC and how it was presented in our 10/8 Technology Report, serves as a great illustration. It basically ended the month where it started, a solid performance by any means. On 10/18 it recorded its third straight impressive earnings report higher by 5.3%, with the prior two advancing by 8.2, 17.2% on 7/18 and 4/20 (both of those went on to fill their gaps). The stock seems to have made the successful transition from a hardware to software play, which BB attempted to do as well but is off 38% from most recent 52 week highs compared to ERIC being just 5% down from its. The stock has been on an upward trajectory for just more than 2 years now and this name is being pulled to the very round 10 figure in the near term in my opinion.