Technology bulls started Friday on defense. The Nasdaq 100 index spent most of the session in the red as the biggest tech stocks swooned before a frantic short covering rally lifted the benchmark ahead of the weekend, states Jon Markman, editor of Strategic Advantage.
The NDX finished at 15,998, a gain of 0.3%. The index rallied only 0.1% for the entire week. This is not a terrible development. Technology bulls have had a great year, with the NDX up 46.4% in 2023. Moreover, the fundamental outlook remains bright for the large corporations that comprise the bulk of the index. Salesforce (CRM), Nvidia (NVDA), Meta Platforms (META), and Microsoft (MSFT) in November all posted spectacular financial results.
These companies service the biggest corporations and the message from executives during recent calls with analysts is that enterprises continue to spend aggressively to build out their digital transformation strategies. This gale force tailwind is often misunderstood by bears. Laughably, they assert that digital transformation is a one-time sugar rush accelerated by the global pandemic.
The further unwinding of these failed narratives should play out in 2024, however, some near-term consolidation of the gains this year would be healthy. Bulls are likely to concede a decline for the NDX to 15,700, the 20-day moving average. If they fail to hold that level there is a small gap at 15,525 that should be rock-solid support.
Expect bulls to regroup from that point and begin to play offense again. Be patient.
