The Nasdaq 100 Index is still trading near its all-time high, but relative weakness in leading stocks may be hinting at a possible tech correction around the corner. Here’s our simple and quick analysis to help you prepare for the market’s next move.
Editor’s Note: The commentary below appeared in the July 15, 2021 issue of The Wagner Daily stock trading report. The Watchlist and Model Portfolio section of the report is restricted to paid subscribers.
The Nasdaq Composite, Nasdaq 100, and S&P 500 indices remain near their highs, but recent price action “under the hood” may be cause for concern.
Out of the roughly 120 leadership stocks on our daily watchlist, 41 stocks were down 3% or more yesterday (July 14).
Leadership has narrowed to just a few big cap tech stocks pushing higher, which is not a positive sign for the current rally.
The daily chart below shows the Nasdaq Composite on top, and the percentage of stocks trading above their 40-day moving averages on the bottom section:
The percentage of stocks trading above their 40-day moving averages (~35%) is near a level that we normally associate with a significant pullback in the market–BUT the Nasdaq is at its high.
That’s quite a bit of (bearish) divergence!
In the July 14 trading report, we tightened stops to reduce risk, and even proactively sold a few stocks ahead of their stops per intraday alert on Wednesday morning.
Currently, we have closed most of our open positions for a scratch or small loss, while locking in a +20% gain on $NVDA.
Our subscribers are always happy that The Wagner Daily trading strategy continues to protect profits–even if it means sitting on the sidelines for a short period.
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