Former Fan Faves are Gapping Down, While the Indexes Hold Up
So many gaps. And the strategists are finally starting to notice.
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Have you ever seen so many gaps? Oh, there are gaps up, but the gaps down in what I would term former fan faves are incredible. Yet the ETF that folks would use to play them still sits just off the highs. So, you see, ETFs are market cap heavy as well and do not represent what is happening under the hood.
IGV, an ETF to be long software, doesn’t look great, but it hasn’t broken. It hasn’t made a lower low. If it breaks 108, it will be a minor lower low and the first one since April. There is still support all the way down to around 102. If you want IGV to break, you need Microsoft, Palantir, and Oracle to break because they are the top weightings in the ETF.
But you see, while the ‘software’ ETF is still sort of hanging in there, we see a stock like Monday.com MNDY, which was already closing in on the April lows and down nearly 20% from the early July high and then boom, it gaps down and blows right through support with an additional 30% decline.
Twilio TWLO, another former fave, couldn’t even fill the gap in the spring rally. Then it just went plop, down 20% in a day on Friday. But that wasn’t enough, as the selling continued on Monday. It is now closing in on its April low.
The Trade Desk TTD, another former favorite, also couldn’t fill the gap from February. It even got added to the S&P. Then Friday, it dropped about 40%. It hasn’t touched the April low, but it left an island overhead with the action from May through August.
Sometimes they don’t even gap down. Salesforce.com CRM is just visiting the April lows.
Workday WDAY had a gap down in May and has never recovered, and now visits the April lows.
Let me remind you, these stocks are all technology stocks. So not all technology is going gangbusters. I have a sense these types of moves are why a strategist who I saw on television last week and was so bullish, citing this and that, was on television again on Monday was cautious. All of a sudden, he has statistics that say only x percent of stocks are over their 50-day moving average.
Wait, he just noticed that? That was the case a week ago when he was so bullish.
My point here is that it’s not just the drugs that look terrible. It’s not just energy that can’t get out of its own way. Nor is it the Transports. It’s also software. If it wasn’t for software acting like it does, I bet there would be more talk of ‘old economy/new economy’. We haven’t heard that one yet.
In the meantime, Monday’s action was dead. Breadth wasn’t great, but it wasn’t awful either. It was like the majority of stocks just slept through the trading session. You can see the tiny little uptick in the Overbought/Oversold Oscillator. It’s the math. The math is in play for the next few days.
