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Technology Sell-off Continues As S&P 500 Makes Big Reversal
It was another wild day on Wall Street, with the Technology S&P 500 having a huge reversal. Stocks open strongly, but Technology began to fade by mid-morning, and by the close, the S&P 500 had reversed a nearly 80 bps advance to close down by 10 bps.
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It has been a while since I have written about our old friend, the February 2016/Brexit trendline. It is a trend line I have been merely extending, as the days and month have gone by for nearly two years, and still, it holds a level of importance almost 2 years later.
When we look at the chart more closely, we can see that the S&P 500 was able to rise above that trendline, something that has not been able to achieve for a while.
We can see that it is acting as a strong level of resistance still, and the S&P 500 reversed after hitting it. Could we be looking for a retreat to 2,600? Sure. Is it a big deal? No. In fact, the trading action the last couple of days has been absolutely nuts.
The Vix was up modestly today, to about 11.68, undoubtedly very low levels still. If you haven’t seen this article on the ZeroHedge or the video that goes with it, check it out. It is fascinating.
As noted in our blog write-up from Friday, Netflix shares continue to trend lower and seem to be heading back towards the lower end of the channel around $170. The resistance at $190, to this point, has held firm.
The semiconductors continue to get slammed, with no sign of a bottom yet forming. We got the sell-off we had looked for, but instead of a bounce and rally into days end, the selling just continued. The only stock performing well in the group is Intel ($INTC), and that is because the stock has so badly underperformed all year-long.
Intel shares are up only 22 percent so far in 2017, and while that sounds great it pales in comparison to the returns of Micron, Nvidia, and Lam which even after the massive sell-offs are still all up about 70 percent.
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Even big tech names like Microsoft ($MSFT) got clocked today, falling by nearly 4 percent on the day, to close at $81. Share of the stock are now in the middle of filling the gap, and likely to continue to fall back towards $79.
Apple appears to be rolling over as well, and looks ready to move back towards $160.
Alphabet looks very close to a bottom.
One of the big beneficiaries of this rotation has been the bank stocks, which have risen at the cost of Tech just look at the chart and the divergence below.
While Consumer discretionary stocks like Home Depot, Costco, Disney, and Starbucks have taken off.
Technology merely got overextended, and now the shares of these stocks need to come back down. The XLK suggest it needs to fill that gap at $61 and return to its long-term trading channel, a decline of another 2 percent.
The bottom is coming in the tech wreck just not yet.
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Michael Kramer and the Clients of Mott Capital own shares of $NFLX, $DIS, $SBUX, $GOOGL
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 recommendations made during the past twelve months. Past performance is not indicative of future.
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Tags: #sp500 #vix #chipmakers #micron #nvidia #news #stocks #consumer #starbucks #disney #banks