Nasdaq/Russell Revert to the Mean:
The Nasdaq which was doing plenty of the heavy lifting earlier in the year, along with the Russell 2000, has weakened its grip. In the spring/summer months the tech and small cap heavy benchmarks enjoyed double digit advantages on a return basis, but as of recently that has nearly disappeared. Presently the Nasdaq is now higher by 5% YTD, and the Russell fell back into negative territory this week for 2018, albeit fractionally down .5% (the S&P 500 and Dow have gained 2.3 and 2.8% respectively). Contributing to the softness of course is AAPL, which is a proxy of the Nasdaq as it comprises 7% of the index. It now trades 17% off its most recent all time highs, but from a risk/reward scenario, its charts complexion is looking a bit better. It is now back above its gap fill from the 7/31 session and its 200 day SMA. On the Nasdaq’s RSI it has now made 4 higher lows in the last month, another positive, and it has recorded higher lows on PRICE with bullish piercing line candles on 10/30 and 11/15. But the big elephant in the room is its trading underneath the 200 day. It has CLOSED above that line just 4 of the last 28 days. The longer it resides below that line is of course bearish and until it is back above that line trade cautiously.
FANG Lacks Bite:
An abundance of discussion has always been made about the FANG names, and perhaps with good reason as they carried the Nasdaq on their shoulders from the March lows through the summer. Since then they have floundered with GOOGL the only member not in bear market territory now 17% off its most recent highs, and FB the worst now 36% off its 52 week highs following its horrific earnings report on 7/26 (AMZN now trades 22% off its recent heights). Last week we looked at AMZN’s weekly technical picture, and this week lets examine NFLX. It seems to have very bearish sentiment, perhaps FB is worse. On the weekly chart a break below a bearish head and shoulders trigger of 271 would carry a measured move to 121. The right shoulder is just 3 weeks in duration currently and frankly would like to see another one or two as the left clavicle was created in 7 weeks.
Examples:
We have not spent a great deal of time of the electronic component and instrument space in technology, as software, hardware and semiconductors dominate a lot of attention. Today we will spend a great deal of time on them in the meat of our report in the next paragraph. Below is the chart of FN and how it was profiled in our Technology Report from 11/9. This week rose 2%, admirable as the prior two weeks advanced by a combined 21%. To add to the bullish narrative it has now produced back to back weekly CLOSES above the very round 50 number, a figure it was rejected the week ending 2/24/17. From a fundamental perspective earnings have been very well received with FOUR consecutive positive reactions higher impressively by 10.6, 6.2, 7.6 and 24.7% on 11/6, 8/21, 5/8 and 2/6.