Group Outlook:

We have been pounding the table on the weakness in two of the most important spaces within technology, the semiconductors and software. The former never really made much headway at all this year, and despite that the Nasdaq was able to prosper. The SMH traded within a rough range of 95-110 and the ETF now sits 16% off most recent 52 week highs (three of the top 4 components INTC NVDA AVGO are teetering on the bear market threshold of 20%). But the chart below shows the sudden drop that software dished out. The PSJ has surrendered more than 11% in the last 2 weeks alone, and it has now caught up to the SMH, down 13% from its most recent highs made just in mid September. Of course AAPL and AMZN, the two biggest names in the Nasdaq hail from neither of these 2 arenas, but their success depends a lot upon them.

Performance of the Large Caps:

Here we have a weekly chart of the QQQ’s, and we know the old adage that markets climb a wall of worry. This index shows it has ascended a colossal blockade. If this week to CLOSE lower, it would be its first 3 week losing streak in more than 14 months. The last 2 weeks did drop by a combined 6.2%, although it did manage to find firm support at its upward sloping 200 day SMA. The weeks ending 9/21 and 10/5 did produce a doji candle and bearish engulfing candle respectively, the former which tends to warn of fatigue. Volume trends have been negative for the ETF, with little in the way of accumulation this year. To read this paragraph up to here seems so gloomy, could it be a bullish contrarian sign? My feel is that this week is critical that we see a bullish candle, as the similar two week slump the weeks ending 2/2-9 which lost 9%, the latter on huge volume like last week. The QQQ bounced almost 6% the week ending 2/16.


I happen to be a very big fan of the round numbers and candlesticks. They of course come second to PRICE action alone, but they are instrumental in gathering information for a possible investment.The chart below of RST and how it was profiled in our Technology Report on 10/1, has both of the aforementioned approaches. On 9/28 it peeked above the very round 20 number ridding itself of its teenager status, and the very next day soared 7.5%. On 10/2 it recorded a bearish dark cloud cover candle and 3 days later it was back below 20. Todays move back above is significant as it is not shying away from it and today could be viewed as a break above a bull flag which has a 6 handle measured move. Bulls would love to see a weekly CLOSE above, as the last 3 were all above 20 intraweek, but none were able to finish above it.

This article requires a Chartsmarter membership. Please click here to join.