Technology and other growth stocks on Friday were stronger than the broader markets, yet the Nasdaq Composite still slipped to 10,705, a closing loss of 1.0%, states Jon Markman, editor of Strategic Advantage.
For the week, the benchmark Nasdaq lost 2.7%, and fell to the lower end of the trading range that started from the October lows.
Technology bulls in 2022 have had a rough go. Rising interest rates have smashed premium valuations. Now professional investors are worried about worsening demand in 2023 from enterprise and retail customers.
The benchmark has critical support at 10,600, the bottom of the current rising channel. This week, a close below that level would lead to weakness toward 10,263, the November low, and potentially 10,089, the October bottom. There is overhead resistance for the Nasdaq at 10,928, the 50-day moving average.
In short, this is getting serious, have no doubt. Bulls need to retake the 50-day average this week to show they are serious about getting on a more positive footing. Given that tech stocks are now deeply oversold, and positive December seasonality is backend loaded, my research and instinct for this week are to expect strength. However, I am also prepared to recommend going short if bulls are incapacitated and do not cooperate. Let’s see how the week opens on Monday.
Our current position is the WisdomTree Bloomberg Floating Rate Treasury ETF (USFR), a cash alternative.
We were on the sidelines Friday, awaiting a more spirited showing from bulls that never materialized. Be patient but ready to strike.