Bears started Tuesday in full attack mode, bolstered by continued selling across enterprise software and semiconductor stock groups, states Jon Markman, editor of Strategic Advantage.

The Nasdaq 100 closed at 15,273, a decline of 0.9%. The loss for the benchmark is the fifth decline during the past six trading days. The weakness also puts the NDX within easy striking distance of its rising 50-day moving average.

Bears argue that the continued selling is more evidence that stock prices fully reflect all of the possible good news coming in the second half of 2023. Datadog Inc. (DDOG) lost 18% on Tuesday even after the enterprise software concern reported better-than-expected sales and profits.

Revenues jumped to $509 million during the quarter, up 25% year-over-year. Billings rose to $519.6 million, up 30% versus a year ago. Traders didn’t care. Shares got a hefty haircut. It’s the same sentiment that has sent semiconductor shares broadly lower in the wake of better-than-expected results last week from Advanced Micro Devices (AMD).

The good news has not been nearly enough to maintain the upward trajectory of high-flying tech share prices. This is all part of the process, though. Shares are traditionally volatile around earnings reporting season. It is more important to access if support levels are holding, or routinely failing.

In the case of the broader NDX, bulls still seem to be buying pullbacks. The benchmark bounced Tuesday from its 50-day moving average at 15,105, closing at 15,273. However, even with the rally from the lows, bulls have been unable to retake the now declining 20-day moving average at 15,410.

The Bulls need to win back that lost ground, then build from there. Although I expect the Bulls will succeed, there is no reason to deploy capital until the NDX puts together a small winning streak.

NASDAQ 100 Timing Model: Members were instructed to buy ProShares Ultra QQQ (QLD)—a 2x leveraged ETF that tracks the Nasdaq 100—at $63.00 on June 28. Members then sold half of the position on July 19 at $70.59 for a 12.1% gain. The second-half position was sold Tuesday on stop at $64.53, a gain of 2.4%. The overall gain was 7.3%. The trade is now closed.

Learn more about Jon Markman here...