Technology bears learned Thursday that bullish momentum is multifaceted, and hard to kill, states Jon Markman, editor of Strategic Advantage.
The Nasdaq 100 bucked the weaker trend for other major stock averages and closed at 13,390, a gain of 0.3%. The rally was the fourth advance in the past five days.
Bulls can thank big technology laggards. I wrote earlier in the week that key leadership stocks like Apple (AAPL) have pushed back to the best levels since August 2022. Bears are easily enticed by the idea that narrow leadership for big technology issues portends a bigger decline. The opposite is usually true. Leadership stocks lead, and laggards eventually follow.
This is happening in real-time as Amazon.com (AMZN) and Alphabet (GOOGL), begin to attract legions of new professional buyers. Shares of Alphabet soared Thursday by 4.3% after analysts had an epiphany following the keynote address at its Google I/O developers conference. They are reassessing the idea that Alphabet is failing in its race with Microsoft (MSFT) to bring artificial intelligence to enterprises and consumers. They are telling their professional clients to buy Alphabet shares.
This sentiment should lift the stock toward $122, the high it reached in August 2022. There is a clear theme; Bears are in the process of conceding a rally for the Nasdaq 100 to 13,750, the August 2022 high. Interim pullbacks are buying opportunities.
The NDX Loop: Members bought the ProShares Ultra QQQ (QLD) on May second at $48.20. The two-times leveraged index fund closed Monday at $50.72, up 5.2% from the entry level.
Set up to sell half at $53.80 LMT GTC, and half at $58.20 LMT GTC. Set a new trailing stop loss at the new $46.01 STP.
Behind the Headlines: The Dow fell 0.7% to 33,309.5. Energy posted the steepest decline of all sectors. Communication services led the gainers. Breadth favored decliners five-three. There were 288 new lows vs 105 new highs.
In economic news, the annual producer price index advanced 2.3% last month, following a 2.7% gain in March, the Bureau of Labor Statistics reported. April saw the smallest annual increase since January 2021, Stifel said in a note. The consensus on Econoday was for a 2.5% rise in April. Sequentially, PPI rose 0.2% last month, following a 0.4% drop in March and compared with Wall Street's view of a 0.3% gain.
On Wednesday, government data showed that annual consumer inflation unexpectedly cooled in April, while monthly price growth accelerated. The Federal Reserve has been increasing its benchmark lending rate since March last year in a bid to bring inflation down, with the latest hike coming last week, when the central bank hinted at a potential pause in its tightening campaign.
"Coupled with yesterday's reading in consumer prices, this morning's PPI report, while showing ongoing improvement, is not yet convincing that the Fed has done enough to tame inflation," Stifel economists said in a note.