Software Stocks Are Holding On By A Thread
While the market didn't do much today, this sector could go either way. Perhaps Microsoft holds the key to the next move.
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The Market
There were a lot of individual stock moves in the market, but not much in the way of the indexes. And that means the indicators barely moved.
The biggest move to the downside came from software as a group. The group, in general, has done nothing in a year. If it wasn’t for the first quarter swoon in 2025, we’d be looking at this group thinking, Why do we bother?
I have been rather ambivalent on the group. I would be more bearish on it if it broke, but it doesn’t. It keeps threatening to do so. Here is the chart of IGV, and you can see that despite the shellacking the group took today, it’s still hanging by a thread. It wouldn’t surprise me if it broke that line or if it held. I prefer the individual stocks, but I suspect if you look at the chart of Microsoft down below, and see that if it breaks, this will too.
The Utes tried again today to make some ground, and while they were positive on the day, they did not really gain ground or change the look of the chart. I do, however, remain positive, especially since the Utes have now been green for four straight days, something they haven’t been able to do since early October. Heck, to get to five straight green we have to go all the way back to late July.
And what of sentiment? Nothing much changed. I figure it’s hard for folks to get giddy when some of the fan favorites (technology) are not playing along. I am still eyeing the end of this week as a short-term overbought period.
New Ideas
I find myself warming up to IYR’s chart. It has gone nowhere all year, no one even talks about the REITs anymore, so why can’t it rally? As long as it stays over 93-ish.
Today’s Indicator
The McClellan Summation Index is still rising.
Q&A/Reader’s Feedback
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My rule of thumb when a well-watched stock breaks a well-watched level, we look for the possibility that the breakdown is a false one. We had success with that recently with Costco. I have given Microsoft (MSFT) nearly two months to recapture that 500 area, and it has failed to do so. This top measures to the 430 area, so unless it can reverse course and recapture 500 in a hurry, that would be the measured target over time.
Dell Technologies (DELL) hasn’t broken down, but if it does, it completes a head and shoulders top. That 115 level is important.
Uber (UBER) should rally again, and it probably even crosses the downtrend line, but there is resistance all the way up. You don’t want to see it trade much under 82-ish.
We’ve looked at Procter and Gamble (PG) several times in the last month or so using a channel like this, looking for a bounce off the lower line (we got it). There is just so much resistance overhead that it is hard for me to get excited about it. If it starts to map out something like I have drawn in blue, I might warm up to it more.
I have liked the chart of Nutrien (NTR) for what seems like forever. And while it’s been generally ok, it has lagged and for the last six months has mostly been a big fat nothing. Yet I still think there is a base there but if you are looking for something that looks imminent and dying to get started, I don’t think NTR is it. It is the epitome of slow money.
Spotify (SPOT) has a measured target in the 500-520 area, but thus far shows no sign of holding. Let’s see what it looks like if/when it gets down there. Maybe there will be a spike low/cleanout that looks tradeable.
We had a nice trade in the cruise stocks last fall, but now Carnival (CCL) got to resistance and looks vulnerable to another setback.
Procter and Gamble has a downward channel and Seagate (STX) has an upward one. For the time being, I would trade the channel. So unless/until something breaks on either side of the channel, that’s the way to play it.
I would love to see Garmin (GRMN) get up and over 215. If the market was oversold, I’d think, okay, give it a try, but we are not oversold, so I’d be inclined to wait for it to get up and over that resistance. If the chart is still sloshing around under 215 by the time we get back to an oversold condition, then I’d probably be more excited over it.
Cheniere Energy (LNG) has met its downside target. It hasn’t done a lot of work down here, but I think it can cross that downtrend line to start the process. The first thing it would need to do after that is get over 200 (a higher high). I like it as a bottom fish.
