Software Surge:
Software scored its second best weekly gain of 2019 this week jumping 4.2%. It was bolstered by top component MSFT having a stellar week after earnings rising 5.3% its 3rd best weekly return in the last 2 years (NOW rose 12.5% this week too). The story of the week had to be the bifurcated action between software and semiconductors. With the SMH loss of 1.8% and IGV gain, there was a separation of an eye opening 600 basis points. Below shows the performance of software, semiconductors and the QQQ. There will be some obvious correlation as the two subsectors make up a huge part of technology, but it was interesting to see how the semiconductors lagged software since last August until briefly leapfrogging them earlier this month. Software still deserves your capital over the semis broadly speaking, but each individual stock should be judged on its own specific merits.
Semis Spent?
The semiconductors via the SMH recorded just their fourth weekly loss of 2019 this week, but it was the way in which they did it that was concerning. The ETF registered a bearish harami at all time highs this week, and this weeks candle was a spinning top too which often indicates a fatigue in the prevailing trend. Does this mean it is the start of a bear market, of course no one knows this, but the more likely scenario in my opinion would be a pullback into a 109.97 double bottom breakout in a base one year long. Most troublesome for me was the earnings reaction in XLNX, the general in the space thrashing lower by 17% on 4/25 (the prior 3 all ROSE by double digits). Listen to the generals, what they are saying is always valuable information.
Examples:
Internet plays witnessed some action this week in the way of earnings, with TWTR the most recognizable. It held a very nice gain of 15.4% from Tuesday well. The same can not be said for SNAP which reported on Tuesday after the close, but by the following session saw a big decline from aftermarket highs falling 6.1%. Below is the chart of IAC, which is also the majority owner of best in breed play MTCH, and how it appeared in our 4/22 Technology Report. It recorded an all time high WEEKLY CLOSE Friday, and its weekly chart is a thing of beauty. The break above the ascending triangle has occurred this week, and a retest is certainly possible after Wednesdays shooting star candle.