Warning Signs?
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To the casual observer, today’s market action seemed to be innocent enough. After all the S&P 500 ($SPY) finished down by 40 bps, which is certainly nothing to be alarmed over. Afterall, the S&P 500 just closed at record levels on Friday. But a few undercurrents have caught my attention over the past day or two that have put me on alert
Technology Warnings?
The technology sector is one for sure, as measured by the Technology Select Sector SPDR ($XLK). The ETF continues to trade above its trading channel. The best case scenario is that the ETF just trades sideways back into the channel, which could quickly happen and would take no more than few days to occur. Conversly, it could fall hard, and push to the lower bounds of the range.
The ETF was down about 50 bps.
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Alphabet Sloppy Trading
Alphabet ($GOOGL) shares traded very poorly today, with shares of the stock down nearly 2 percent closing at $985. Again this stock also set a new high just last week around $1,010. So is this a panic, absolutely not. The thing that I continue to fear the most with the chart of Alphabet is the gap created after first quarter results, and has yet to be filled.
Amazon Struggles
Amazon also traded poorly today, with the stock down by nearly 1.7 percent. If you are wondering why the XLK was only down 50 bps, while Amazon and Alphabet declined nearly 2 percent each, it is because Amazon is not in the XLK, it is in the consumer discretionary ETF ($XLY), with its monstrous weighting of 15 percent.
These two stocks surely didn’t trade like companies expected to report strong number in just three days time.
Tesla Too
Tesla shares were no different, with shares falling by over 2 percent.
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Biotech
Biotech also continues to trade poorly, with the NASDAQ Biotech ETF ($IBB) falling to roughly $327, 1.22 percent.
Alert?
When we put all of these little pieces together, one has to wonder if there is a de-risking event going on at the moment. Are investors lightening up on some of these big gainers and taking profit. Or are they lightening up before results? All of these stocks and sectors are the among the best-performing stocks of the year and it would make sense if there was profit-taking going on.
These stocks and sectors should continue to be monitored carefully. They are market leading stocks and sectors, with the ability to set the tone, and can be used to judge the mood of the market.
One day does not make a trend, but it doesn’t mean you shouldn’t be on alert.
Thematic Growth Investment Portfolio – IB Asset Management Mott Capital Management uses a long-term thematic growth approach to investing in equities. We search for investments that both reflect and help to shape…
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Michael Kramer and the clients of Mott Capital own shares of GOOGL, TSLA
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Tags: Alphabet, Amazon, Technology, Biotechnology, Tesla