Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

This shows trouble brewing under the surface of Big Tech

Jason Goepfert
2021-12-14
Despite highs in the Nasdaq 100 index, many of its stocks are struggling. Global markets continue to underperform the U.S. Gold's positive window.

Trouble under the surface of the Nasdaq 100

Last week, we saw an impressive thrust in buying interest among a broad swath of stocks. That kind of behavior has been almost universally positive for future returns, and those are among the most consistent signals we study.

Not all is hunky-dory. Among the primary drivers of sentiment has been the resilience of American Big Tech, and many of them are stumbling. Not the companies that grab all the headlines; it's the smaller stocks that make up the rest of the Nasdaq 100 (NDX).

Within the NDX, there has been a protracted divergence that's getting more profound. Fewer than 65% of NDX stocks are currently trading above their 200-day moving averages. That is a stark change from a year ago when internal trends improved as the NDX marched steadily higher. The index is still doing its thing, but there have been fewer and fewer participants on each successive peak since the summer.

There is a massive divergence in Nasdaq 100 members above their 200 day moving average

When we zoom out over the past 20 years, we can see that there have been 4 relatively similar periods. All preceded a tough market for the index over the next year or so.

Relying on one measure can give a skewed picture. Looking at other views of what's going on under the surface confirms disagreement between the index and many of its stocks.

While breadth thrusts are among the most consistent signals, divergences are among the least consistent - especially in 2021. So, we'd tend to place more weight on the positive signs recorded last week than the negative ones in specific sectors, including many of the tech stocks in the Nasdaq 100. 

Stat box

Traders bought the dip on Monday, flooding the SPY fund with more than $6 billion despite a down day. That's only the 8th time in the fund's history it took in more than $6 billion on a down day.


Risk-on as global stocks continue to underperform

Dean showed that the technology and consumer discretionary sectors maintain perfect absolute and relative trend scores. And, technology is the only sector with an offensive tilt to register a new relative high last week. Real estate showed a modest decline on a relative basis. However, the sector continues to exhibit healthy trends.

The percentage of countries with a positive relative trend score versus the S&P 500 declined to the lowest level since July. When country ETFs underperform to this extent, annualized returns for a broad-based global equity allocation are unfavorable. 

Gold stocks' positive window

Most of us are aware that stocks have a seasonal tailwind around this time of year. Jay pointed out that less known is that gold-related stocks have enjoyed consistent gains, as well.

As a proxy, we will use the Fidelity Select Gold fund (FSAGX). Per Fidelity:

Investing primarily in companies engaged in exploration, mining, processing, or dealing in gold, or to a lesser degree, in silver, platinum, diamonds, or other precious metals and minerals. Normally investing at least 80% of assets in securities of companies principally engaged in gold-related activities, and in gold bullion or coins.

The chart below shows the cumulative growth in FSAGX only during these seasonal windows since 2000.

Gold stocks have a positive seasonal window

When we look at the year-by-year results, we can see that 30 out of 33 years were winners or flat, with the losses being relative small compared to the average gain. The last 14 years were all winners. 

DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.