If You Think the Semis Are Weak, Take a Look at These Stocks
Semiconductors are part of a long list of stocks that are down. The good news is that so many are down that this might be good news for investors.
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Remember the rocket/space stocks? Have you looked at them lately? Let’s forget SpaceX (SPCX) because it is special because of Elon Musk, the same way Tesla (TSLA) is different than any other car or EV chart.
Here are three formerly hot stocks in the space/aviation/rocket area. AST SpaceMobile (ASTS), Rocket Lab (RKLB), and Archer Aviation (ACHR). They don’t all look the same. Some topped in June while others topped a year or more ago. But they do all have one thing in common: the decimation in the charts over the last month.
If you go through almost any group of charts, this is pretty much what you’ll see. A month ago, it was the food stocks until they rallied. Over the last few months, it’s been the Homies. We know the Utes looked terrible until they finally enjoyed an 8% rally. We know many uranium stocks look like this. So do the metals and lithium names. And the industrials? Not great either.
So, while everyone is busy complaining about their semiconductor stocks, I am here to tell you it is not just the semis that have been whacked of late. You don’t get Nasdaq clocking in at nearly 700 new lows on just semiconductor and AI stocks getting sold. I know that’s the focus, but there is an entire market of stocks that have been going down for a long time.
Yet in the last few days we’ve seen the number of stocks making new lows on Nasdaq begin to contract. Wednesday saw nearly 700 new lows. Thursday saw 535, and Friday’s big decline? That had 453.
Oh sure, we may see the market gap down on Monday, and this will be moot, but for the first time we have some contraction in stocks making new lows on Nasdaq.
When I plug in what-ifs for the Nasdaq Momentum Indicator, I discover that some time in the next week Nasdaq will be oversold. I’m sorry if that is a wide gap in terms of time, but I can’t change the math. If I walk Nasdaq down about another thousand points in the next week, we see the Momentum Indicator ignores the price and begins to rise. That is the definition of oversold.
My own Overbought/Oversold Oscillator will get oversold around midweek this coming week. Since this is the ten-day moving average of breadth, I look back to the point where we are dropping a long string of red numbers to determine if we are oversold. Tuesday is a coin toss, but beginning Wednesday there is a decent string of red numbers to be dropped. Not only that, look at the numbers we drop on the 30-day moving average of Nasdaq’s breadth beginning Tuesday: a lot of red too.
I still think sentiment is complacent. I still think overall the others should outperform in the coming months. Maybe we’ll get the sentiment indicators to switch to bearishness this week (I doubt it), but the last few months have solidified my view that this remains an Either/Or Market. I think tech gets a chance to rally this coming week.
And yes, I know Monday is October 19th, which makes for much chatter about 1987, but I will stick to my statistics and hope that my interpretation of them is correct.
