Tech Pullback

Quick Take: Buyer’s Bias. Leadership takes a hit as the broader market pulls back.

Dear Reader,

There is very little to inspire buyers these days. The bias remains bullish here as long as institutional grade selling remains absent and price holds above major moving averages. 

FOR THE WEEK:

INDEXCLOSE% CHANGEYTD %
DJIA26469.89-0.8-7.2
Nasdaq10363.18-1.315.5
S&P 5003215.63-0.3-0.5
Russell 20001467.55-0.4-12

Profit taking in the Nasdaq saw many strong names come back closer to earth. 

US relations with China remain at a low with the closure of the Chinese consulate in Houston, and the reciprocated action of closing the US consulate in Wuhan.

President Trump said the coronavirus will likely get worse before it gets better. 

Consumer spending will take a hit this fall if Treasury Secretary Mnuchin’s plan of reducing unemployment benefits to 70% of what people were earning.

Gold hit another high as the Dollar hit a low. Defense under uncertainty is to be discerned from these types of moves. 

Expect good earnings news to come out early in season for second quarter announcements. Bad news will likely come later, presenting a sentiment challenge for the bulls. 

TECHNICALLY SPEAKING

  • Total volume for the week held pace with last week. Bulls held a slight edge with advance/decline ratios of 1.1 and 1.2 for the NYSE and Nasdaq. 
  • The NYSE saw a 12% increase in new highs to 240.
  • Both the NYSE and Nasdaq had a 9% decrease of new low as they notched in 20 and 64 respectively. 
  • On the Advance/Decline front, the bull cooled from last week as the NYSE posted a barely bullish 1.4 and the Nasdaq a barely bearish 0.8

WEEKLY SECTOR ACTION

Tech took a step back for the week as discretionary showed a bullish vote for the economy with its holdings in retail, automobiles, consumer durables, apparel, hotels, and restaurants.

SCTRNAME% CHG
Consumer Discretionary Sector FundXLY1.7
Energy Sector FundXLE0.82
Consumer Staples Sector FundXLP0.54
Financial Sector FundXLF0.32
Materials Sector FundXLB0.31
Utilities Sector FundXLU0.07
Industrial Sector FundXLI-0.16
Real Estate Sector FundXLRE-0.22
Communication Services Sector FundXLC-0.56
Health Care Sector FundXLV-0.79
Technology Sector FundXLK-1.63

LEADERSHIP

Tesla (TSLA, -5.59%) sold off for the second week in a row. This electric car/technology company has been more of a read on sentiment than a solid investment. Its market cap has it as a potential new member of the S&P 500.

As a group, traditional leadership from the FAANG and friends declined with 50-day moving averages poised to serve as support. 

Facebook (FB, -4.68%), Apple (AAPL, -3.85%), Netflix (NFLX, -2.54%) Google (GOOG, -0.24%.) 

Microsoft (MSFT, -0.78%) reported lower than expected growth for its cloud server business Azure.   

Amazon (AMZN, +1.58%) bucked the trend here as its pandemic friendly business continues to thrive. 

Please refer to The Growth Stock Report for individual stock setups. 

Play smart, play safe.

Dan