As “expert” opinions on Friday’s tech meltdown pile on, here is perhaps the most actionable: that of “world renowned commodities guru” Dennis Gartman.
THE NASDAQ’S ONE DAY COLLAPSE: Will The Trend Line Hold?:
Friday’s low was right along this trend line… which if we had space, could be extended well back into ’16. If this is still a bull market… and until proven otherwise it is… then buying the NASDAQ on weakness today should be wise and we shall.
Turning to the so-called FANG stocks… Facebook; Apple, Netflix and Google…and including the likes of NVidia and Microsoft… all collapsed on Friday if by collapse we mean breaks of > 2.0% and which in some instances was > 3.0% and which had traced out massive daily and even weekly reversals to the downside as new all-time highs were made early in the trading session followed by movements well below the previous day’s lows. Google did in fact trace out a weekly reversal to the downside in perfect textbook fashion; so too Facebook and so also Netflix. Apple failed to trace out a text-book weekly reversal, but only because it did not make a new all-time high last week, having made its all-time high earlier in May. NVidia, one of the highest of the high flying stocks, did not trace out a weekly reversal to the downside, but did, however, trace out a textbook daily reversal.
Further, all of these reversals came on massive volumes. For example, NVidia, which has tended to trade 35-50 million shares daily traded over 100 million on Friday. Netflix, which has tended to trade 5-7 million shares/day, on Friday traded 10.3 million shares. Facebook, which has tended to average 15-20 million shares, on Friday traded 35.6 million and Apple, which has tended to trade 25 million shares/day on Friday traded 64.8 million.
We have included the chart of the NASDAQ at the lower left of p.1 this morning, noting that the lows on Friday amidst sheer panic selling in the early afternoon took the Index to a trend line that we extend back to the lows of last July, although we show it only into the lows of mid-April of this year. It shall take courage on our part to believe that the bull market is still intact, but in fact it is. Thus, if the NASDAQ were to fall back toward 5675 or so today we shall have to be a buyer, for as Old Turkey would remind us, “After all, this is a bull market.” Further, a drop to 5675 shall only be a 3.8% correction from the peak.
Finally, if the NASDAQ does test those lows, our urge shall be to own banking shares above all else for the banks did amazingly well on Friday, rising smartly even as the FANGSs were collapsing, predicated upon the Fed moving to tighten monetary policy at its meeting this week and thus widening net-interest income for the banks… the real driver of bank earnings. Regional banks, especially, may be best served, with the ETF soaring 3.1% on Friday and breaking out to the upside. Any periods of weakness this week are to be bought.