Technology bears stepped up on Friday against all odds, states Jon Markman, editor of Strategic Advantage.
The Nasdaq 100 closed at 15,203, a loss of 1.8%. The weakness of the benchmark reverses all of the week’s earlier gains. For the five-day stretch, the NDX lost 0.5%, the second decline in as many weeks.
The oddity of the weakness on Friday was that the route occurred despite a better-than-expected financial report from Adobe Systems (ADBE). The San Jose, Calif.-based company is a major enterprise software provider and a key player in the burgeoning artificial intelligence field. Executives noted on Thursday evening that profits and sales exceeded prior forecasts and that the outlook for next year remains upbeat.
The bears should have been knocked back. Leading AI stocks should have rallied. However, Adobe shares opened lower, and the selling gained momentum. Adobe stock closed down 4.2%.
Weakness spread to semiconductors. Shares of KLA Corp. (KLAC), Lam Research (LRCX), and even Nvidia (NVDA) turned aggressively lower, posting losses of 5.4%, 5.1%, and 3.7%, respectively.
It’s easy to make too much of Friday declines. Traders often worry that giant hedge funds, the so-called smart money, are positioning ahead of some weekend disaster. Weakness becomes self-fulfilling. The cause of the losses is professional money managers reining in exposure ahead of the September Federal Reserve Open Market Committee meeting.
The FOMC policy statement is due Wednesday, and the NDX should head back toward overhead resistance at 15,308, the rising 50-day moving average. There is support at 15,139; the September seventh reaction low.
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