Tech Stock Charts Don’t Look Good, but the Market Is Oversold
It’s still an Either/Or market, but right now, with the market oversold, we could see a bounce.
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Three months ago, the semis were in free-fall as a sizeable hedge fund blew up. The plunge was so great that the volume in SMH skyrocketed to a record. The narrative quickly became that tech was done.
The stocks rebounded, but still the majority refused to dip their toe in. Instead, the story promptly became one of broadening out. It was everywhere, the broadening out chatter. Then those non-tech ‘others’ drifted down. And they drifted down some more. And tech rallied a bit.
Then the others drifted down even more, and tech rallied more. By late September, folks were calling tech stocks the safety trade, noting they weren’t going down with higher rates. A narrative had developed!
But in the last few weeks tech has tumbled while the others have rallied. Folks are not necessarily using the broadening out story as much this time, likely because they were so burned two months ago. But they are becoming somewhat more concerned about their beloved tech trade.
The charts of most tech stocks are not great; they look toppy or droopy. But when we looked at the indicators a few days ago, my Oscillator was slated to get oversold midweek, which is where we are now.
The other day I did an exercise for you where I walked Nasdaq down a thousand points this week to find the point in time the Nasdaq Momentum Indicator would stop going down and turn up. At the time, I apologized for such a wide range—and I still do—but that range was Tuesday until this coming Monday. We are now into that range, and despite Nasdaq being down on Tuesday, the Momentum Indicator ticked up.
I would still like to see something break to change the sentiment, but we’re now in the time frame of short-term oversold.
Even the Hi-Lo Indicator for Nasdaq, which had refused to cross under .19 to get oversold, has finally pushed down and is now at .14. It is no guarantee of a rally, but at least this indicator is now oversold. I still prefer the ‘others’.
But has sentiment changed? Well, I would say it has gone from complacent to hope to gloom. I would still like to see a change in sentiment, but we have a minor one: the ISEE equity call/put ratio’s ten-day moving average is now closing in on the Tariff Tantrum lows.
The curious part is the stocks do not trade panicky; they just trade like folks have enough of them.
I always prefer to see a panicky move to change sentiment, but at least the oversold conditions are in place now.
