Technology bulls took a breather late last week even as a controversial technology leader appeared to refocus. The Nasdaq 100 slipped by 0.4% to close at 13,340, states Jon Markman, editor of Strategic Advantage.
The NDX began firmer after Elon Musk announced that he is stepping down as chief executive at Twitter. The news sent Tesla, Inc. (TSLA) shares sharply higher and briefly lifted the benchmark NDX.
Tesla stock has been under pressure since October when Musk took control of the social media platform. Unfortunately for shareholders and NDX bulls, the problem is more about the factious leader being on the platform versus running it. Tesla shares closed Friday down 2.4%, and the benchmark reversed, too.
Bears argue that the NDX index is too heavily weighted toward a few large capitalization companies and that it does not reflect the health of the overall technology sector. That analysis is true; however, it also misses the point.
Professional money managers ultimately drive stock prices. They are compelled to seek investments with liquidity and follow momentum. Pros bought big-cap tech shares in March as the regional bank crisis hit full stride. They added to positions later as stronger earnings and positive sentiment about artificial intelligence lifted Meta Platforms (META) and Microsoft (MSFT). Even with the Tesla share price reversal on Friday, the NDX has good support at 13,140.
Expect bulls to be replenished at that level. The Bears are far from winning anything. Major resistance is 13,750, the August 2022 high.
The NDX Loop: Members bought the ProShares Ultra QQQ (QLD) on May second at $48.20. The 2x leveraged index fund closed Friday at $50.35, up 4.5% from the entry level....Set up to sell half of the new position at $53.80 LMT GTC, and half at $58.20 LMT GTC. Set a new trailing stop loss at a new $46.29 LMT GTC
Behind The Headlines: The Dow closed marginally lower at 33,300.6. Consumer discretionary saw the steepest drop among sectors, while utilities led the gainers.
For the week, the Dow and the S&P 500 lost 1.1% and 0.3%, respectively, while the Nasdaq rose 0.4%. Breadth favored decliners 5-3. There were 344 new lows vs 106 new highs. I really like Oracle (ORCL) in this leadership role as it strictly sells software to enterprises and governments—making earnings a solid reflection of business spending trends.
The University of Michigan’s main gauge of consumer sentiment was 57.7 this month, down from April's print of 63.5. The consensus on Econoday was for a decline to 63. The 9.1% sequential drop in consumer sentiment reflects mounting concerns about the economy following a spread of negative news, including the debt crisis standoff, despite recent macro data showing no signs of a recession, according to Surveys of Consumers Director Joanne Hsu.
Year-ahead expectations for the economy slumped 23% from last month, while the long-term outlook slipped 16%, reflecting consumer fears that a downturn won't be brief, Hsu said. The US two-year yield rose 8.8 basis points to 3.99% on Friday, and the 10-year rate added 6.7 basis points to 3.46%.