Round Number Pushback:
We are big proponents of round number theory, and the current situation is that the Nasdaq is dealing with it now. Since cratering below the very round 8000 figure on 8/3, slumping 3.5%, it has recorded just four CLOSES above it. Revealing however was that none were consecutive. The tech rich index has shied away from the number, and one should anticipate a move to the upward sloping 200 day SMA, which defines the simple trend. A retest this month would be appropriate as it did in three month periods in March and June. If contact is made it will be important to see how the benchmark responds. The long term moving average was resistance last October, November and December. Resistance became support, and look for names that are bucking the negative action well. They will often be the strongest performers once, and if, the Nasdaq resumes its strong march northward.
Security Outlier:
The software security group, seems to be spoken about incessantly. Perhaps for good reason, but the space has not acted all that bullish. The HACK ETF is swimming underneath its 200 day SMA, and has the look of a bear flag. Last weeks soft advance of .5% ended a 4 week losing streak, but the prior 3 weeks ending between 8/16-30 have all CLOSED very taut, and that type of action tends to lead to explosive moves in the direction in which it formed. For HACK that is down, and FEYE which in the past was spoke of as a best in breed name, it can not be looked in that light any longer. After meeting stern resistance at the very round 20 number last November-December it now trades 37% off most recent 52 week highs. PANW is spooning the round 200 number in a bearish descending triangle pattern. A decisive break below the formation carries a 50 handle move lower. Bulls in the subsector most likely are not feeling secure in their longs, pun intended.
Examples:
The month of August is behind us and the year end run is about to begin. Staying small last month would have been a good strategy, but looking forward one should try and find names that acted well during the volatile late summer period thus far. One such example is SWCH, and below is the chart of how it appeared in our 8/29 Technology Note. Names in the home improvement space have been acting well, and this stock has traded very taut all year, a hallmark bullish characteristic in any market, but even more impressive given how 2019 has gone so far. Be patient here and wait for PRICE confirmation, as always on a CLOSING basis.