It was something of a sloppy session yesterday, and the start of profit-taking in Technology (XLK) ahead of the SpaceX IPO. For the broad market, momentum (SPMO) still dominated, but at a slower pace than prior sessions.

Momentum’s Parabolic Move

Momentum has gone straight up just as several of the hottest names in the market, including Sandisk (SNDK) and Western Digital Corp (WDC), have over the past two months.

A 50% retracement from the April rally wouldn’t even knock momentum to its 50-day moving average.

There were fresh tickers among the top advancers, but would-be bottom fishing remains very selective.  It's not the time to throw a dart at a pile of oversold names and think they all have a chance to rally.

Broadcom Stumbles

Broadcom (AVGO) reported results that crushed estimates across the board, so guess what the stock did…

Yep, it got hammered.

Management reiterated guidance rather than raising it, triggering selling. This is what we call ‘priced for perfection,’ with a cherry on top.

Two sets of stocks have mad gargantuan moves this year:

• Profitable Tech
• UnProfitable Tech

In a pullback, we would be spying profitable tech first. There has to be a pullback of consequence. Although it doesn’t feel like it, many stocks that made big moonshot moves are cheaper now than a few months ago, and buyers have been eager to take advantage of the dips.

Today’s Session

It's been a while since a major name indicated to open significantly lower, so all eyes are on Broadcom and other tech names.  Interestingly, some software names are catching bids, and other semis aren’t getting smashed to the same degree.

It's been a heck of a run for Technology (XLK) – the best this century.  It's been an even more impressive run for semiconductors. The question now is how long before the buy-on-dips crowd makes their move?

Dry Powder

A lot of money is being raised this year through IPOs and offerings, including Google’s $84.0 billion equity deal. How much of that cash might have normally gone into dips is unknown, but it is a valid concern.

But it's been my experience that the money is always out there, and it goes where it thinks it will be treated best, and for now, that's still technology stocks.

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.