Nasdaq Lucky Seven Unlikely:

The Nasdaq added .4% Thursday after a wild intraday ride, but did underperform the Dow and S&P 500 which rose by 1.1 and .9% respectively. The tech heavy benchmark is still nearly 5% lower YTD, and without another huge rally the last 1 1/2 sessions it will put an end to a 6 year winning streak. Let us give credit where it is due as it is still outperforming peers on a relative basis as the Dow, S&P 500 and Russell 2000 have all declined by 6.4, 6.9 and 13.3% thus far in 2018. One could make the case the bottom could be in after the historic session on Wednesday, and todays bullish reversal CLOSING more than 240 handles off intraday lows. Some of the most influential technology names gave clues to the 2 day, rip your race off rally. GOOGL recorded a doji candle Monday, and has since stormed back above the very round 1000 number, which was support dating back to December 2017. AMZN registered a spinning top candle Monday, which often signals a potential reversal of the prevailing trend. There is still work to do, but that last 2 days seem to have brought out Santa. The VIX is looking to retest a 28.94 cup base trigger taken out on 12/24 and 2019 should be a very interesting year.

Software Acting Anything But:

It is old news to mention that the software group has been the best subsector within technology. Usually it is the semiconductors that will stand out during a firm Nasdaq advance, but softwares strength is indisputable. Below is the ratio chart comparing it to the benchmark many money managers measure themselves against. The power they have displayed is clear to see. We know there has been a decent amount of M&A activity in the space, with the big one RHT being swallowed by IBM. But there have been others including IMPV MB and APTI to name a few since October. The IGV is now out of bear market territory down 17% off most recent 52 week highs. The second biggest holding in the ETF is MSFT just above 8%, and it will give valuable clues to the funds direction, and the Nasdaq. Will the break below the very round 100 number on 12/21 and today produce a huge bounce as that figure was support on 10/30, 11/20 and 12/20. Or will the CLOSEs above 100 recently be a bull trap? You have to love watching the markets.

Examples:

Let us be totally frank. Long names have been totally decimated in the recent huge drawdown markets have endured, with the exception of course of the last 2 sessions. Any names that withstood the barrage should be given some kind of medal, and indeed they are few and far between. Below is the chart of VCRA and how the telecommunications equipment name was presented in our Technology Report from 11/14. The stock sank in October like everything else, but held its own in November posting very admirable weekly gains of 5.5, 4.5 and 8.9% the weeks ending 11/9, 11/16 and 11/30. It broke above a bull flag pattern, which began at the round 30 number in late October on 11/15, and acted well POST breakout, a great sign. Give credit for the name never CLOSING below its rising 50 day SMA since climbing above it on 10/26. Even with the recent extreme downside volatility it remains well above the highlighted trigger. Keep this name on your best of breed watchlist.

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