Nasdaq Reign Slippery:
The Nasdaq is still the king of the world, but remarkable is who is on its heels. Notice this chart below shows the weekly and yearly percentage returns of the benchmark ETFs, and Russia and Canada are giving the tech rich domestic fund a real run for its money. In fact the prior week the EWC had the top position, and let’s keep in mind both of those aforementioned nations are heavily dependent on energy, which has been clobbered this year. A big concern and factor in this 3 horse race going into the end of the year, will be if the Nasdaq can manage to avoid making a lower low, something it did not do last week when it bounced off the round 7700 number on 10/3 (the prior higher low since last December was on 8/5 at 7662.90). In the very short term it needs to get above the very round 8000 number where it was rejected today, which doubled as a declining 50 day SMA.
Software To Soften Again?
Seasonality can often give valuable clues, but keep in mind PRICE action supersedes all other indicators. But below is an interesting illustration of how the IGV has acted on a monthly basis since 2015. The last 5 months of the year are obviously the weakest of the year, and I was surprised to see that December, the software ETF finished lower than it started for the last 4 years. This year the group has struggled mid year, and could this be a fifth consecutive year of the IGV not CLOSING higher than it began? If tax loss selling becomes an issue it certainly can be. The IGV is trying to CLOSE above a declining 50 day SMA, a line it has been below since losing it on 8/2. To give you an idea of how weak it has been since, today was just the third, 3 session winning streak since undercutting that line, and 3 is the longest streak as well.
The semiconductors have certainly come to life in recent months, a very welcome development. The SMH is in the midst of a bearish rising wedge pattern, and the ETF has had some difficulty near the round 120 figure this April, July and September-October. Below is a name in the space not widely followed, and how it appeared in our 9/30 Technology Note. For that reason alone it could be bullish, and the stock has been holding the round 40 number well as of late. On its WEEKLY chart it did record a near precise double top within just pennies of each other in the low 44s the weeks ending 3/1 and 8/2. If it can get above that level heading into year end, the name can potentially appreciate much higher.