The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Technically the US tech index looks ripe for a deeper correction, with momentum on both the daily and weekly charts looking fairly bearish. On Friday the index closed below the June 2013 uptrend and 100-day moving average.
The index also just managed to close below the March 27 low, despite having every opportunity to close above this pivot; this tells a lot about sentiment in this space.
The 9- and 14-day RSIs are well below 50 and heading lower, suggesting prices should remain contained within the lower trend.
Fundamentally investors and traders alike have been talking all year about some outrageous valuations in names like Facebook, Twitter and Tesla, and these valuations are now fully in play. Traders are switching out of these names into other areas the market, such as stocks that are returning cash to shareholders through buybacks.
Stocks such as Twitter have now dropped over 40% from the December high; given the level of shares available to sell after the expiration IPO lock up, you’d expect upside to be limited.
Bear markets have also been seen in names like Amazon and Facebook, while Tesla is 19.9% from its recent high.