Nothing goes up in a straight line. The Nasdaq has exhibited authoritative strength since the late December lows, and is now looking at a likely 3 week losing streak for the first time in 2019. It was in need of a breather as it rose 17 of the prior 19 weeks beginning with the week ending 12/28/18, rising nearly 2000 handles in the process. The tech rich benchmark now trades 7% off most recent all time highs, and today bounced off a 200 day SMA that has been flatlining for since the start of the year. That suggests there is no real trend, up or down for the moment, but one must give the benefit of the doubt to the bulls as the prevailing move has been dynamic. Keep your bullish hopes on a short leash however.
All investors should pay attention to what the semiconductor group is trying to tell them. The holdings in the SMH, like most other ETFs are top heavy, and that could be shielding what is going on within the entire space. Similar to what the industrials went through with a heavy blow with BA and MMM, the SMH may be feeling some of the ill symptoms. Top component INTC still trades 25% off most recent 52 weeks highs, and second heaviest holding in the SMH QCOM is matching that weakness down 24% from its own recent peak. If one wants to put “lipstick on a pig” INTC did record a bullish engulfing candle Thursday and QCOM a hammer. These “value” plays may prove to be traps, or buying opportunities. Whatever they end up doing remember cash is always a position.
In the type of environment we are witnessing it is important to monitor which names are demonstrating good relative strength. Below is the chart of ROKU, that we highlighted recently and how it appeared in our 5/10 Technology Report. This stock was UP today on a feeble tech tape rising 2.2%, as the Nasdaq dropped 1.6%, and more importantly on a WEEKLY basis is HIGHER by 7.1% as the Nasdaq is LOWER by 2.4%. It stopped just pennies short of the very round 90 number, but is poised to record a SIX week winning streak. This is a name to buy on any weakness going forward.