Too Good To Be True?

The bulls stepped up just where they need to Thursday, with the Nasdaq bouncing precisely off its rising 200 day SMA, and right off the round 7700 number precisely. Even with todays bullish reversal, it is still lower by nearly 1% for the week heading into Friday. But one has to respect how it has defended the long term moving average in 2019 since breaking above it in February. It took just 2 sessions for the tech heavy index to reclaim it when it fell below it in March and June. Both times immediately following the recapture, the Nasdaq moved nicely higher by 25 of 35 sessions between 3/11-4/29 and 25 of 38 times between 6/4-7/26. Tomorrows jobs report should provide a very good idea, if todays move is for real. A quick move back below the 200 day SMA would be an ominous sign.

Competition Is A Good Thing:

As I like to proclaim often, trends in motion tend to stay that way, more likely than they are to reverse. Case in point is the ratio chart of the semiconductors versus software below. It is still in a healthy uptrend, even with the very nascent firm action in some former software leaders. For the IGV it registered a bullish engulfing candle Thursday rising 1.8%, and in the process recapturing its 200 day SMA quickly, a very good sign. Good risk/reward can be had with the ETF now with a defined stop underneath todays lows on a CLOSING basis. The SMH which sits just 5% off its most recent 52 week highs, the IGV is 9% off its most recent yearly peak, filled in a gap from the 9/4 session today. These 2 leading sub sectors fighting it out is a good development for the markets, and should benefit shareholders alike.

Examples:

A rising tide lifts all boats, but those that do not receive the positive sentiment have to be questioned. Below is a good example of FFIV, and how it appeared in our 9/24 Technology Note. It did record a bullish hammer candle off the round 130 number Thursday, but as long as the lower lows and lower highs are still in place (dating back one year now), stay short. Looking back at the chart one can see the reclaim of the downward sloping 50 day SMA lasted this time around about the same length of time as February, April and July. It still trades 30% off most recent 52 week highs, unacceptable on a strong overall technology tape. 

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