NASDAQ 100 Selling Not All Due To AAPL

2014 has gotten off to a questionable start, the bulls are trying to find something positive to say, but the truth is this is not a good start to the New Year.   So far the S&P and Dow Jones Industrial Average do not look that bad, only general selling there, but something else is going on behind the scenes.  The somewhat tame action in the Dow and S&P is causing some investors to be complacent, but anyone paying attention notices considerable weakness in the NASDAQ 100 (NYSE:QQQ), where most institutional investors rushed as last year came to an end.

Initially, pundits may argue that investors are getting out of higher beta names as this New Year begins because those are the ones that ran highest and most aggressively last year, but that is not completely true.  In fact, the Russell 2000 (NYSE:IWM) has been much more resilient than the NASDAQ, so as investors look to sell they are actually focusing on selling larger technology companies for now.

One of the most obvious is a stock I have already told you to sell.  When Apple (NASDAQ:AAPL) was $572 I recommended taking profits and waiting for it to pull back to our defined support level as that is offered in our real time trading report for Apple, and the declines that happened since then added to the downside pressure in the NASDAQ 100, but it is definitely not all due to Apple.

Institutional investors are looking at the valuation levels of some of these large cap technology companies and questioning the relative value of those positions.  Some are deciding to sell, others simply are deciding not to buy more, and technology as a hold looks tired as a result.  This has been the theme in the first part of 2014.

Some casual investors may not be attentive enough to recognize that the selling pressure has thus far been focused on large cap technology companies, but those who have wonder how long it will take for the selling pressure to roll over from large cap technology companies to other stocks and other markets. 

Our current combined analysis of the NASDAQ, Dow Jones industrial average, S&P 500, and Russell 2000 tells us that selling pressure will soon expand beyond the NASDAQ 100 to these other markets.  Specifically in our midterm and longer term trading channels, resistance levels were already tested in all of these markets and a pullback towards longer term support levels is now expected by rule.

Our current combined analysis is bearish as a result, and it will stay that way so long as longer-term resistance levels remain intact or our longer term support levels are tested.  On a case by case basis the same is true for individual stocks, but in our opinion it is best to first understand the direction of the market before buy and sell decisions are identified in individual stocks, so this market evaluation is not just for people who like to trade market based ETFs but also for people who want to go with the flow.

Our combined analysis tells us to expect lower levels based on successful recent tests of both mid term and long-term resistance, and that simple but straightforward analysis suggests that the current selling pressure in the NASDAQ 100 is likely to roll over into other markets soon.