This time of year one often hears the argument that seasonality is a tailwind. That may be true, but perhaps investors have been catching on over the last few years and taking gains just a little bit earlier into year end. The chart below is a good illustration of this. Notice the last 4 years, the Nasdaq is a perfect 4 for 4 CLOSING higher than it started in the month of November. December happens to be a coin flip. Digging a bit deeper, software via the IGV has CLOSED lower than where it started in December FOUR out of the last four years (not a typo), and the SMH has CLOSED lower than where it began 3 of the last 4 years in December. The chart of the Nasdaq itself shows that it is encountering problems at the round 8200 number. The tech heavy benchmark has been above the figure 4 times intraday since falling below it on 7/31, but zero CLOSES above. Two of those sessions that were above 8200 intraday, recorded bearish shooting stars on 9/12 and 9/19, and an engulfing candle on 10/22. A decisive move and CLOSE above 8200 would be a big plus heading into November. Of course the elephants in the room that are that two 2 components in the index, AAPL and MSFT which are 1 and 2% off most recent all time highs will have a big say in the direction going forward.
Can An Old Dog Still Teach New Tricks?
Within the biotech space the “big four”, for those that are old enough to remember, have been giving its group a boost. AMGN sits just 4% off all time highs, CELG has been taken over, and BIIB registered a huge move Tuesday. GILD reports tonight, and a big dog from the semiconductor group REPORTS tonight as well. Below is the chart of the grizzly veteran INTC, and it sports a good looking bullish ascending triangle pattern. This is not a recommendation, but a nice report after hours tonight could potentially give another boost to the semiconductor space. It has the same pattern as QCOM, which has an 80 pivot in its own triangle. Interesting tonight will be to see if Intel can break its pattern of three consecutive negative reactions having slipped 1.1, 9 and 5.5% on 7/26, 4/26 and 1/25.
The semiconductors have had some soft news this week via earnings reactions. XLNX today fell .8% and this former leader is now 34% off most recent 52 week highs. It has lost ground 9 of the last 13 weeks, and is lower this week to heading into Friday. Of course TXN was the big disappointment and has slumped nearly 9% this week so far, and if that holds it would be the worst WEEKLY fall since the week ending 8/21/15. Below is one that was affected by the Texas Instrument earnings release, ADI, and how it appeared in our 10/21 Technology Note. It had been weak prior to that and is now 16% off its most recent yearly peak. This week is showing weak relative strength down 3.8%, as the SMH is higher by 2.6%. As long as this name trades below its 200 day SMA lean bearish.