Technology Outlook:
Technology was somewhat vibrant Thursday as the Nasdaq rose .6%. Sectors critical to the spaces success include semiconductors, and the SMH remains range bound in a long symmetrical triangle that began in the month of March. A break to the upside could produce a 20 handle measured move, of course that is a big IF. These patterns are agnostic, meaning they can break either way. INTC has a big say in its direction, and bulls could feel invigorated that the stock is down 20% from most recent 52 week highs, yet the ETF trades just 8% off its 2018 highs. Thursday AAPL rose more than 2%, on an upgrade to bolster the tech arena. I prefer plain vanilla, generic moves higher on no news but lets see how technology reacts to a Friday quarter ending close tomorrow. Software needs to play its part and is higher by 2% this week heading into Friday, cutting in half the large 4% haircut it received last week with the ETF PSG.
Examples:
I am old enough to remember the John Chambers era where the companies earnings reaction would have a profound effect on the markets, especially tech obviously. These days “old tech” have been holding up rather well, with not only CSCO behaving bullishly, but MSFT, HPQ and even ORCL acting well. Even CSCO’s old rival JNPR looks relevant again, as it flags just below the round 30 number. Below is the chart of CSCO and how it was presented in our Friday 9/14 Game Plan. It is now higher 9 of the last 10 weeks with firm volume trends, and it has acted well POST breakout from a cup base trigger of 46.47 recently. It has CLOSED in the lower half of the daily range the last three sessions as it takes a well deserved, prudent pause. Keep an eye on a name that has been rumored to be a target of CSCO for years, never purchase a stock solely for that reason, NTGR as it rests upon its 200 day SMA. It is 20% off most recent 52 week highs and the last time it touched that line is screamed higher 9 of the next 11 weeks ending with a 20% climax the two weeks ending between 7/6-13.
Seasonality:
Technology will almost surely be the main focus of market participants risk tolerance. When the overall group is doing well, and investors 401K’s are reflecting that, appetite for growth is heightened. The overall, group via the XLK, has been stout in 2018 as the ETF has risen more than 18%. The fund has advanced 6 of the last 8 weeks, and the last 2 have CLOSED very taut within just .33 of each other. If this week finishes in that range it will complete a three week tight pattern, an O’ Neill favorite pattern. It sits just 1% off most recent all time highs, and good news still abounds. In the month of October, the last 4 years it has ended the month higher than where it started 3 of 4 occasions, and in November it is batting 1.000, gaining ground from where it began the month in each of the last 4 Novembers.