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Let me preface what I will say with this: I do not believe in the idea of calling tops. However, when short-term caution flags arise, I take note and heed the warning the market is sending my way by pulling back exposure. With that in mind, I do not love the action here in tech land. The price action is sluggish, and some yellow and red flags are popping up here ahead of big tech earnings, including:
Weakness in Bitcoin: Bitcoin tends to provide “risk on” signals and has been a solid forward-looking indicator for tech. Over the past few months, it has led the Nasdaq in both directions. Could weakness in BTC be foreshadowing weakness in tech?
Potential for sell the news type event: Year-to-date, the Nasdaq 100 ETF ((QQQ - Free Report) ) is up nearly 18%. The index has an open price gap below and has yet to tag its 50-day moving average since breaking out.
Image Source: Zacks Investment Research
Sentiment: The CNN Fear & Greed Index suggests that bullish sentiment is on the rise. Generally, bulls want to see negative or neutral sentiment so that the market can climb the proverbial “wall of worry”.
Healthcare outperformance: When the healthcare sector is strong, it tends to act as a “risk-off” gauge for the general market. While tech has lagged recently, healthcare-related names such as Dexcom ((DXCM - Free Report) ), Merck ((MRK - Free Report) ), and Intuitive Surgical ((ISRG - Free Report) ) have outperformed dramatically.
Image Source: Zacks Investment Research
Money is moving into beaten-down sectors: At the time of this writing, the Nasdaq is down three-quarters of a percent, while the SPDR S&P Regional Bank ETF ((KRE - Free Report) ) is flat on the session. Investors may be moving money from extended technology and growth stocks to beaten-down stocks that feel like discounts.
Conclusion
Though the medium-term trend remains higher in tech, there are some subtle signs beneath the surface suggesting that the space may need a brief pullback. Investors should manage their portfolio exposure accordingly and look to have some fresh powder in the event tech stocks sell off post-earnings this week.
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Sell the News? 5 Reasons Tech May Pullback
Let me preface what I will say with this: I do not believe in the idea of calling tops. However, when short-term caution flags arise, I take note and heed the warning the market is sending my way by pulling back exposure. With that in mind, I do not love the action here in tech land. The price action is sluggish, and some yellow and red flags are popping up here ahead of big tech earnings, including:
Weakness in Bitcoin: Bitcoin tends to provide “risk on” signals and has been a solid forward-looking indicator for tech. Over the past few months, it has led the Nasdaq in both directions. Could weakness in BTC be foreshadowing weakness in tech?
Potential for sell the news type event: Year-to-date, the Nasdaq 100 ETF ((QQQ - Free Report) ) is up nearly 18%. The index has an open price gap below and has yet to tag its 50-day moving average since breaking out.
Image Source: Zacks Investment Research
Sentiment: The CNN Fear & Greed Index suggests that bullish sentiment is on the rise. Generally, bulls want to see negative or neutral sentiment so that the market can climb the proverbial “wall of worry”.
Healthcare outperformance: When the healthcare sector is strong, it tends to act as a “risk-off” gauge for the general market. While tech has lagged recently, healthcare-related names such as Dexcom ((DXCM - Free Report) ), Merck ((MRK - Free Report) ), and Intuitive Surgical ((ISRG - Free Report) ) have outperformed dramatically.
Image Source: Zacks Investment Research
Money is moving into beaten-down sectors: At the time of this writing, the Nasdaq is down three-quarters of a percent, while the SPDR S&P Regional Bank ETF ((KRE - Free Report) ) is flat on the session. Investors may be moving money from extended technology and growth stocks to beaten-down stocks that feel like discounts.
Conclusion
Though the medium-term trend remains higher in tech, there are some subtle signs beneath the surface suggesting that the space may need a brief pullback. Investors should manage their portfolio exposure accordingly and look to have some fresh powder in the event tech stocks sell off post-earnings this week.