“The Good, the Bad and the Ugly” was a mid-1960s spaghetti Western (the movies were made in Italy, directed by Sergio Leone, and were Westerns) that starred a young Clint Eastwood, Eli Wallach, and Lee Van Cleef. You’ll see quickly why this movie came to mind while we were reviewing our charts.
Technical Scores for the stocks in S&P Information Technology Sector are still generally good as 57% have Good / Strong Scores…
while the Technical Scores for the stocks in the IGV Software ETF are awfully bad as only 15% have Good / Strong Scores while 63 ½% have Weak Scores…
and the Technical Scores for the stocks in the S&P Internet Select Industry Index are really terribly ugly with only 10% of the stocks carrying Good / Strong Scores and 80% have Weak Scores.
Source: 22V Research
With data like these, we’ve been concentrating our efforts on the short side among technology stocks. Poor action in the Tech Sector has helped us with our call that NASDAQ will underperform the S&P and the DJIA and that NASDAQ has made its high for this cycle. The last part of our call is especially unpopular.
It’s been odd that NASDAQ’s momentum (bottom panel) has collapsed, and continues to collapse, yet the index is not even at its October 2020 low. This phenomenon has been able to persist owing to the strength of the Big 7. But momentum is weakening for the Big 7 – we want to sell AMZN, FB and GOOGL – and, consequently, NASDAQ’s price is going to have to correct, too.
NASDAQ Weekly Chart w/ 40-Week Moving Average and Weekly MACD
NASDAQ Relative to S&P 500 made a new reaction low today.
NASDAQ Relative to the DJIA is picking up speed on the downside.
And the Big 7 (pink line, AAPL, AMZN, FB, GOOGL, MSFT, NVDA & TSLA) is coming under pressure, too. Our index is now off by 10% from its November high and is now underperforming NASDAQ by a little bit as NASDAQ is off 9% from its November peak.
While there are 61 stocks in the S&P Internet Select Industry Index (SPSIIN) we’re only showing the Scores for the 30 biggest sorted by market cap. You’ll hear the following, “I can’t sell these stocks, they’re already down a lot.” This should only confirm that they’ll go lower. Bottoms are formed when nobody wants to buy stocks. We’re not close to that point now.
Source: 22V Research
