Machines Strike Again- Tech Wreck V2.1

Notice anything Bizarre today in the technology sector? Around 12:30 the NASDAQ Composite sold-off in nearly a straight line by almost 2 percent from its highs. It took about one hour to go from peak to trough. That is all the time it takes to the move the market these days. If you think this is Deja-Vu or a repeated post from late June, I’m here to tell you it is not, something similar happened on June 9 and June 27, and again today, July 27.
^IXIC Chart

^IXIC data by YCharts


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12:30 – Technology Bloodbath

The crazy thing about this sell-off is how eerily similar it felt to the two previous sell-offs. The damage was in technology stocks such as Microsoft (MSFT), Tesla (TSLA), Alphabet (GOOGL), the Biotech ETF (IBB), and the technology ETF (XLK). But the damage in the broader S&P 500 and Consumer Disc (XLY) was not nearly as impacted.

Technology Stock Sell-off

The market moved as if it were in a vacuum with all the bids just melting away.

NASDAQ Trend

It is evident the market is using the 50-day moving average as a support level. While it is also apparent that the Nasdaq is following a trend line, that has been drawn on the chart below, as resistance. When the index gets too far above that trend, we see a sell-program come and drive the composite lower. The moves are profound and swift, with the trend going back to September of 2016.

Nasdaq 50 day moving average

Machines

There is something taking place in the market where some institution is coming in with a large sell program concentrated on the riskier and higher Volatility parts of the market. It seems it is being put to work with a sloppy get it done by the end of the day instruction. This is causing other participation, and VWAP “dumb” algo’s in the market to play catch-up and putting further pressure on the stocks.


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ETF Effect

Then there is the ETF effect, simply put, if an ETF goes down, then the stocks within the ETF start getting driven lower. Notice only 5 of the top 25 stocks in the ETF were up, and they were due to strong earnings results, with the expectation of ADP, which was up on news Pershing Square was building a stake.

XLK Technology

This is the world we live in today, where one big sell program can set things into motion and with the modern technology of Algo’s and ETF’s the markets can get moving directionally very fast.


Sectors


Sectors


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Disclaimer

Michael Kramer and the Clients of Mott Capital owns shares of TSLA, GOOGL, and NXPI

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.