Painting The Landscape With A Bullish Brush:
We have spoke of the volatile nature of the Nasdaq, and of course others, during the month of August. This is a common occurrence, but 13 of the 22 sessions in the month moved by at least 1%. Keep in mind tops are often formed with frantic price action (bottoms just the opposite with smooth, gradual rounding trade), and September has started with both days moving at least 1% as well. A major stepping stone we discussed yesterday would be a few CLOSES above the very round 8000 figure. Some bright spots include names like ROKU which has advanced 15 of the last 20 sessions. AMZN showed good relative strength Tuesday rising on a soft tape. AAPL has responded well off the forceful drop to the very round 200 number on 8/23. Below is the chart of SNE and we like the way it is being magnetically pulled toward the round 60 number. We recommended this name in early August and this leader is doing what leaders do, giving an opportunity to add on the way UP.
Software Feeling The Heat:
Examining the ratio chart of the two heavyweight spaces in technology is always informative. Software has long carried technology, and that effort seems to have been giving other subsectors time to catch up. Both the SMH and IGV now trade a respectable 6% off their most recent 52 week highs, but the SMH trounced the IGV last week higher by 4.3%, while software added 1.2%. This week so far is more of the same with the SMH higher by 1.3% compared to the IGV up a fractional .3%. For sure there are still disappointments within, notably XLNX and CREE now off 28 and 38% from their most respective yearly peaks. But they are now overshadowed by names like AMBA KLAC LRCX LSCC CRUS and LSCC. We have become a services based economy, which pulls software names higher, but semiconductors are still in almost every product we come into contact with on a daily basis.
“Clusters of evidence” is a term some technical analysts like to use when peering at charts. It occurs when a few different factors align, that make the trade a bit more bullish prone, IF a breakout were to occur. Below may be a good example with the chart of AKAM and how it appeared in our 8/30 Technology Note. First we liked how the initial test of a rising 50 day SMA held firm after a recent cup with handle breakout. Secondly there seemed to be a brick wall at the very round 90 number, with just the 8/1 session CLOSING above the figure even though several traded above intraday. That was until Wednesday, as the bulls pushed it through. It has the feel of a beachball being held underwater effect. Look for a possible move to par in the near term.