Staying on the sidelines of the tech sell-off

Why one technical strategist is advising clients not to buy this dip

Apr 8, 2014 @ 7:52 am

tech stocks, technical analyst, sterne agee, sell off
+ Zoom

The Nasdaq Composite Index has lost four percentage points in two and half days, led lower by technology and biotechnology. These have been the momentum darlings over the past year. What a difference a month makes.

Sterne Agee technical strategist Carter Worth advises clients not to buy this dip. He points to accelerating price erosion on accelerating volume, which resulted in a "key reversal" on Friday. (Higher high, lower low and lower close than the previous day — also called an “outside day.”) Bottom line: Selling begets selling and Mr. Worth is concerned.

As investors ponder how long the selling might last, we note 10 multiday declines for the S&P 500 Index of at least 1.8% during the past two years. The average decline was 4.3%. The current decline is 1.6%.

Long-term investors are accustomed to weathering selloffs, momentum investors are not. They hit the sell button. Active traders may find solace (and profits) in playing defense until the selling abates. Income-oriented sectors like REITs and utilities have been outperforming. (Recall our March 28 post, "Hip to Be Square.") So too are gold and 10-year bonds.

There will an opportunity to buy. For now we'll join Mr. Worth on the sidelines.

(Bloomberg News)

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Wirehouse training programs are in vogue

At one time, major brokerage houses ran large, expensive training programs for thousands of young brokers, and now it looks as if they are about to return to that model.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

10 funds with largest 3-year outflows

Even well-managed funds that have beaten the S&P 500’s 10.1% average annual gain have watched investors flee.

Wirehouse training programs are back

At one time, major brokerage houses ran large, expensive training programs for thousands of young brokers, and now it looks as if they are about to return to that model.

New military pension rules need financial advisers to step up and serve

Matching defined contribution plan expected to see more money, more need for sound advice.

Brian Block's $4 million bonus was tied to a key metric at ARCP

Prosecution rests case in fraud trial against CFO of American Realty Capital Properties.

Edward Jones is winning the Google search war

Brokerage firm's digital marketing investment helps land it at the top of local and overall search engine results, report finds.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print