The NASDAQ remains in a box. The index’s trading range has been confined during the last month, bouncing between 11,500 on the upper end and 11,000ish on the lower end. Staying within a relatively narrow window for an extended period is considered consolidation.
It’s been our experience that consolidation comes before a major move up or down. Some market watchers say if you draw a line from the start of consolidation to the end, that’s how high or low the market will go once the range is broken. (See the chart below for an illustration.)
As it stands now, the current line extends about 1000 points on the NASDAQ. If bulls manage to break out of the box, then 12,500 could be in play. On the other side of the technical coin, if bears bust the bottom, then we could see the NASDAQ make another run at the 52-week low.
Just like it’s been for the last month, we are stuck waiting for Wall Street to pick a side. Once the box is broken, we’ll take the side of the winner. Invesco QQQ Trust (QQQ) if the index lays waste to 11,500 and ProShares Short QQQ (PSQ) if 11,000 no longer acts as support.
We wish there was more to add, but like Porky Pig used to say at the end of Looney Tunes’ cartoons… “That’s all Folks.”
It was a rough week for most industries as only four managed to post a profit. SPDR FactSet Innovative Technology ETF (XITK) lead the way as the only sector-based exchange-traded fund (ETFs) we track to top 1%. iShares U.S. Medical Devices ETF (IHI), SPDR S&P Homebuilders ETF (XHB), and Utilities Select Sector SPDR Fund (XLU) are the other three to get into the green.
Much like our take one the current technical state of the NASDAQ, we’ll sit back and wait for the market to exit its current consolidation phase before latching onto any sector ETFs.
As an old friend used to say, “It’s better to be out of the market wishing you were in, than in the market wishing you were out.”
Typically, three things influence a stock’s price:
- The general direction of the market, sideways is not a direction.
- Sector strength or weakness and most are weaker.
- Company specific news.
With the first two ambiguous at best and most sectors underwater, even good news could make it difficult for a stock to swim against the current. We’ve compiled a list of stocks that look like they are on the cheap. When we get the “buy” signal, we will start loading them in this space.