People Are Worried About Software, But It's the Financials Breaking Support
Let's look at some ugly charts from the software stocks. But Financials might be the ugliest.
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The Market
I am going to start with software because they are starting to differentiate themselves. Yes, I know what I lump into software might just be growth, but that’s how I will group it.
We looked at Roper (ROP) several weeks ago because it was one of the first ones to slide. Let me say: none of these are good charts, but we are trying to see if there is any differentiation and/or the beginning of the process of holding.
Roper saw no selling today. None. That is one way to differentiate yourself.
Shopify (SHOP) saw plenty of selling today (-7%), but there was (so far) no lower low. We don’t know yet if this whole wide range will be a way station or part of the holding process. But you can see the chart looks different than Roper.
Then there is Microsoft (MSFT) , which broke to a lower low. It tried to hold and bounce and couldn’t, and now it made a lower low.
Do I think they can bounce? Yes. Do I want to buy for more than a trade? No. Because I want to see what holds and for how long. I want to see bottoms/bases build.
Now let’s talk financials. They look terrible and have for a while. The XLF broke by a smidge today. We’d have to see some follow-through to confirm it, but I see more concern over the software names than I do over the financials. And that is bothersome.
Away from that, 6800 held yet again. But remember that channel I drew in on the Dow a week or so ago? I said the upper end of the channel was around 50,500-51000. We got to 50,500 three straight days, and that was it. Now we are back at the bottom of the channel. Let’s see if we hold, but my guess is that lower end ought to break.
The McClellan Summation Index stopped going up today and now needs a net differential of +1000 advancers minus decliners on the NYSE to halt the decline. So sure tech can bounce, but I still think the 493 are overbought and due for a pullback.
One final point to make is that the VIX did not take out last week’s levels (maybe tomorrow?), and the ISE call/put ratio and the CBOE put/call ratio did not show any signs of panic. So the only bit of panic we saw was in software.
New Ideas
I warmed up to the Transports back in September. It took them quite some time, but they finally got going. About two weeks ago, I thought they had finally gone far enough. Now I want to note that I think JB Hunt (JBHT) looks to me as if it is coming down to tag that line near 210.
Today’s Indicator
The 30-day moving average of the advance/decline line is still overbought.
Q&A/Reader’s Feedback
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The good news is that Astera Labs (ALAB) is making a higher low today vs last week. The bad news is that lately, charts that break like this eventually resume the downtrend. If the stock cannot get up and over 140 in a hurry, then it probably makes its way toward that gap fill that 105-ish area. So the next week or so is key to this stock.
Service Now (NOW) tried to hold, is still trying to hold, but has that feeling of ‘you first’. In other words, many of these software stocks that were trying to hold last week have given way. Rather than guess that this is a low, I think I would rather wait for a pattern to show up. So short-term it can rally because it is holding (so far), but in this market, it seems we should err on the side of caution in software stocks, letting patterns develop.
Marathon Digital (MARA) is interesting only because it had a measured target of 7, and it got there in panic, and so far hasn’t revisited the area. I’d hate to use a stop because of that spike low (usually tested and often bounces from that area). I think I’d say that if it spikes down to that 7 area again, I’d look for signs of holding, which I think would give way to a tradeable bounce. But that’s it so far.
I would love to tell you that Micron (MU) will stop here at 440, and a few weeks from now it will test that 360 area and be buyable because that would line up with the uptrend line (about 3 weeks from now it ought to be there), and it would also be the low from early February. So if it does manage to get to that 360 area a few weeks from now, and it meets the line at the time, I’d probably get interested in it.
