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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 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.
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, Merck and Intuitive Surgical have outperformed dramatically.
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 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.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Nasdaq 100 ETF, Dexcom, Merck, Intuitive Surgical and SPDR S&P Regional Bank ETF
For Immediate Release
Chicago, IL – April 25, 2023 – Today, Zacks Investment Ideas feature highlights Nasdaq 100 ETF (QQQ - Free Report) , Dexcom (DXCM - Free Report) , Merck (MRK - Free Report) , Intuitive Surgical (ISRG - Free Report) and SPDR S&P Regional Bank ETF (KRE - Free Report) .
Sell the News? 5 Reasons Tech May Pull Back
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 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.
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, Merck and Intuitive Surgical have outperformed dramatically.
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 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.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.