November 23, 2020 Update: The tech-heavy NASDAQ Composite (INDEXNASDAQ: .IXIC) could remain range-bound for now as tech stocks have been underperforming. Both tech and growth stocks are expected to underperform in the coming days.
Credit Suisse analysts said in a recent report that they’re concern about tech stocks is the fact that they have seen strength capped at the top of its multi-year channel top from 2009. Further, the NASDAQ 100 has been well above what they see as a typical upper extreme. They believe the risk of a more important topping scenario can’t be ruled out heading into the year’s end.
The Nasdaq (INDEXNASDAQ: .IXIC) short squeeze is over
October 23, 2020 Update: The Nasdaq Composite was close to exiting correction territory on Monday, but it has since backed off. The question now is whether the index has enough fuel to shift higher next week.
Credit Suisse analysts said a large short in speculative Nasdaq positioning was completely wiped out earlier this month. Between Oct. 6 and 13, the Nasdaq triggered its base and rose about 7%, wiping out the very large short position that had been accumulated in Nasdaq futures.
The analysts see that as a mild negative because it suggests the bullish price action in U.S. equities may have been driven by a short squeeze. Now that the move has been completed, Credit Suisse analysts warn that the market may find it difficult to make more gains.
Nasdaq (INDEXNASDAQ: .IXIC) slips as mega-tech stocks tumble
September 21, 2020 Update: The Nasdaq Composite (INDEXNASDAQ: .IXIC) pulled back today as tech stocks declined, leading the way down just as they led the march upward previously. Behemoth tech stocks like Microsoft, Amazon, Facebook and Alphabet were all in the red today, weighing heavily on the index.
The correction isn’t a huge surprise, given how much stocks have been rallying since the March selloff. Investors are now waiting to see whether the Nasdaq Composite (INDEXNASDAQ: .IXIC) is in a correction or whether it has marked a new top ahead of a steeper decline.
The index tumbled down to its 50-day moving average in only three days, but it has become clear that 11,250 is serving as a new resistance level. If the Nasdaq can’t hold the 50-day moving average, it could fall to 10,250, which is where it was in July. The index could even retest its 200-day moving average and February highs of around 9,750.
Nasdaq .IXIC Hits A New All-Time High
Despite the Nasdaq (.IXIC)’s new all-time high, small-caps remained relatively weak and Treasury yields continued to fall, so risk assets might still not be out of the woods. Today’s mixed trends could be attributed to the cautiously optimistic coronavirus-related reports, but ‘under-the-hood’ we saw evidence of weakening participation in the rally, and that’s something that investors should keep an eye on.
Q4 2019 hedge fund letters, conferences and more
The major indices bounced back quickly following Friday’s broad selloff, and while ‘only’ the Nasdaq and the S&P 500 managed to hit new record highs, stocks finished in the green across the key sectors. The Dow was up 174, or 0.6%, to 29,277, the Nasdaq (.IXIC) gained 108, or 1.1%, to 9,628 while the S&P 500 rose by 24, or 0.7%, to 3,352. Advancing issues outnumbered decliners by a 5-to-4 ratio on the NYSE, where volume was slightly below average.
Due to today’s strong bounce, the mighty tech sector erased Friday’s dip, and the Nasdaq (.IXIC) topped the 9,600 level for the first time in history. The tech benchmark seems to be on track to hit the 10,000 milestone sooner rather than later, as tech stocks are attracting more and more investors due to their resilience. Amazon (AMZN, +2.5%) and Microsoft (MSFT, +2.6%) led the charge in the sector, and the software giant once again caught up with Apple (AAPL, +0.6%) with regards to market capitalization, crossing the $1.4 trillion level for the first time ever.
DXY Continues To Push Higher
The Dollar Index (DXY) continued to push higher today, finishing in the green for the sixth day in a row and edging closer to its multi-year high form October. The currency has been appreciating in the face of the declining Treasury yields, as investors increased their bets on the relative strength of the U.S. economy. For now, the consensus is that the U.S. could keep on growing at a healthy pace even considering the effects of the coronavirus, and that could mean that domestic stocks, Treasuries, and the dollar could continue to appreciate hand-in-hand.
Besides the dollar’s strength and dip in Treasury yields, the continued pressure on the price of crude oil also warrants caution in the case of the companies most-exposed to China. The crucial commodity erased last week’s bounce today, and since 'Dr. Copper' also continues to show weakness, it's safe to say that China and the global economy remains fragile. China-related stocks continue to lag the broader market, and volatility could remain elevated in the most exposed sectors until the coronavirus outbreak is not contained.
We might have another busy day in bond and currency markets tomorrow, as even though there will only be a few economic numbers coming out, central banks could make major waves. Fed Chair Jerome Powell will testify before the House Financial Services Committee, while European Central Bank (ECB) President Lagarde is also scheduled to speak just before the opening bell. The JOLTS job openings estimate and the NFIB Small Business Estimate will be out tomorrow morning as well, and analysts expect improvements in both measures in light of the recent uptick in economic activity. Stay tuned!
Will the .IXIC continue its streak and hit 10k? Tell us in the comments section!