If you are one of the multitude of "investors" still holding your tech stocks from the bubble era in hopes of vindication, today was one of those days to focus on something other than your portfolio. Futures market gave a hint to what was in store, having indicating a one percent drop on the Nasdaq 100 before the market open. Indeed, the NDX opened down one percent... its best level for the day. Some of the notable losers came from the group which popped nicely in the latest rally: Intel (down 2%), Lam Research (down 5%), Research in Motion (down 4%), and Google (down 3%). In fact, Google is now threatening a decisive failure of its massive symmetrical triangle. Stay tuned for results...
I find it interesting that metals were up strongly today while the market sank. It means that today's sell-off is probably not centered around fears of a rate hike next week. Something else is happening, and traders should remain very wary of it. Back in June, I wrote of a transitional phase for markets that would end when commodities broke their temporary positive correlation with equities and headed higher without them. This point would begin a period of oversized gains for real assets and intense pain for financial ones. Of course, one session does not mark an inflection, and we have had other days recently in which metals moved starkly opposite from equities. Today's divergence simply struck me as meaningful in a way which I would probably make a hack of trying to fully explain.
Despite the solid gains for shorts in today's session, there were several warning signs to which bears should pay close attention. First, equities managed to firm into the close. Second, volume was light. Finally, the broader market indices such as the S&P 500 were down less than a half percent compared to the heavy selling in tech. None of these developments is particularly conducive to the beginning of a new streak to the downside. Perhaps there is simply not a lot of conviction ahead of the Fed meeting.
Disclosure: Short INTC, LRCX; Long INTC, LRCX, RIMM, GOOG Puts