Why ‘Hot New Tech’ is Getting Crushed by ‘Old Tech’

Until recently, the Nasdaq was driven higher by hot new tech names like Facebook, Priceline and Tesla. Now, ‘hot new tech’ is cooling down while tech dinosaurs are rallying higher. What does this rotation mean?

Priceline, Netflix, Facebook and Tesla are the driving force behind a ‘new and improved’ technology boom.

Those companies are cutting edge, hip, and until recently hot.

But something changed in March. Hip wasn’t hot anymore. PCLN, NFLX, FB and TSLA are all of a sudden 10 – 20% below their highs.

It seems like the money left ‘Hot Tech’ and moved into ‘Old Tech.’

Dinosaurs like Microsoft, Oracle, Cisco and Intel just got a vitamin M shot and boost (M as in Money).

What does this ‘changing of the guards’ mean?

Here’s one possible reason: Stocks in general and the Nasdaq in particular have gotten pricey.

Investors don’t want to go into cash (yet), but they are taking some risk off the table by rotating from high beta tech into ‘tried and true’ low beta tech.

As the third chart illustrates, the Nasdaq (Nasdaq: ^IXIC) has also started to underperform the S&P 500.

The S&P 500 (NYSEArca: SPY) is now top dog and just spiked to a new all-time high this morning. Is this a technical breakout or just another fake out?

Here are two charts that may well change your expectations for the S&P 500:

S&P 500 – Stuck Between Triple Top and Triple Bottom – What’s Next?

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

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Will a ‘Bad Apple’ Spoil the Rest of the Market?

AAPL is down 35% while the Nasdaq is moving higher and the S&P 500 is trading at new recovery highs. Is this bullish for the broad market or will ‘a bad Apple spoil the whole bunch?’

An apple a day keeps the doctor away or so the saying goes. Up until recently Apple (as in AAPL) also kept any bear market away.

For much of 2009 – 2012 the stock market followed this simple formula:

rising AAPL = rising stocks.

Theoretically falling AAPL should = falling stocks, but that hasn’t been the case. Why? And is that bullish or bearish for the broad market going forward?

AAPL – From Leader to Laggard

The chart below shows the percentage gains of AAPL and the Nasdaq Composite since 2012.

Until mid-November AAPL and the Nasdaq traded directionally in sync. Rising AAPL = Rising Nasdaq and vice versa. That changed by late November, when Apple started heading south and the Nasdaq north.

How can this be? Other companies started to pick up the slack and fill the void Apple left behind. Google for example started to rally in November. So did Microsoft, Oracle, Amazon, Cisco, Qualcomm, and others.

The second chart illustrates GOOG’s recent counter-AAPL performance. As shares of other technology sector stocks rallied, their market cap and weighting in the Nasdaq increased.

As AAPL tumbled, its weighting (and importance) in the Nasdaq and S&P 500 decreased. Not only did Apple shares tumble 35%, its weighting in the Nasdaq did the same. It fell from over 20% to 13%.

At its best, AAPL accounted for nearly 5% of the SPDR S&P 500 ETF (SPY) compared to 3.62% today.

Apple’s relevance to the overall U.S. market diminished as Apple shares spiraled lower.

Technical Apple Analysis

The chart below is an updated version of the log chart I first introduced in an August 24 video analysis about Apple.

My comment at the time when AAPL traded at 675 was: “I would like to see a more deliberate test of the upper channel line, but being out of AAPL seems like a prudent move.”

A later issue of the Profit Radar Report recommended to go short with any push above 700.

Getting back to the log chart of Apple; the black parallel trend channel provided a target for the high as well as an initial target for the first leg down. After back testing the lower parallel channel line once more (kiss good bye), AAPL embarked on the next leg down.

On Friday, AAPL closed below support, now red resistance. RSI has not yet reached a new low to confirm the price low. This could be the setup for a bullish divergence, but I would wait for more confirmation in the form of a close back above the red line.

Use that trend line as basis for your stop-loss, because I am following a new parallel channel and a break below this channel support could trigger a bearish technical break down pattern with a significantly lower price target.

Interesting Apple developments and possible profit opportunities will be covered by the Profit Radar Report.