Bears ambushed bulls on Friday as the gains from the previous day were wiped out, states Jon Markman, editor of Strategic Advantage.
The Nasdaq 100 closed at 14,891, a loss of exactly 1%. For the week the benchmark lost 1.3%, the first decline in nine weeks. Bears are excited about the possibility of a major new leg lower for the Nasdaq 100. They are premature. The selling on Friday was expected. I wrote Thursday that the narrowness of the advance, coupled with the short-term overbought status of the benchmark meant a further rally was unlikely. The NDX has stretched too far away from its 20-day moving average at 14,622.
There are some positive developments, though. Artificial intelligence pretenders continue to sell off. International Business Machines (IBM) and even Intel (INTC) ran up in May on strategic AI announcements. Adding AI to a press release should not undo years of corporate obliviousness and incompetence. IBM and Intel shares plummeted last week by 5.9% and 9.3%, respectively.
Meanwhile, the shares of AI leadership firms like Nvidia (NVDA) and Microsoft (MSFT) posted losses of less than 2%. Meta Platforms (META) shares, another AI leader, actually rose by 2.8% on the week. The major stock index moves to follow the shares of leading companies.
The bears are not going to have any real success until they wound Nvidia and Microsoft. Trade is going to be choppy as the NDX works through its overbought status, however, bulls are going to buy any pullback of the rising 20-day moving average. Be patient and ready to buy that decline.
The NDX Loop: No new recommendations at this time in our proprietary market timing system. The Loop netted members 16.5% in its last three-week effort. The next play coming soon.
Stat Sheet: The Nasdaq declined 1% to 13,492 and the Dow declined 0.65% to 33,181. Breadth favored decliners three-one. There were 203 new lows vs 97 new highs.