Nasdaq And 3 Potential Pitfalls: Weekly Nifty 9

Welcome to this week's Research Report insights from Finom Group (for whom I am employed). Each week we offer a deep dive into every aspect of the macro-picture to analyze the most probable path forward for equity and bond markets. Additionally, we offer insights from our weekly Research Report titled the Weekly Nifty 9. 

Research Report Excerpt #1

Are we on the cusp of another double-digit Nasdaq correction? Anything is possible, and since reaching it’s a new all-time high on 4/29/2021 of 14,211, the growth and tech-heavy Nasdaq has once again come under pressure, even with bond yields under pressure.

From the Nasdaq high to the most recent low, the index has already consolidated some 5% before rebounding on Thursday and Friday of this past week. We definitely see the shift in investor sentiment and style lately, but to the degree, it will persist remains an unknown. Tech earnings season is largely over, shy of a handful of companies such as Alibaba and Nvidia in the coming weeks.

Research Report Excerpt #2

When it comes to the Information Technology sector and/or Growth, it doesn’t get any more “Techno” or growth-ier than Apple (AAPL). The stock is the #1 weighted stock in the Nasdaq 100. In 2021, the Golden Capital Portfolio has grown its exposure to AAPL shares, but in a defined manner such that it benefits the overall cost average of existing holdings. We’ve done this through 16 issued trade alerts for Finom Group members, as depicted below:

After some of the strongest results Apple has issued in more than 5 years, we anticipate any additional weakness in AAPL to provide additional trading opportunities. Apple is one of Finom Group’s Top 5 picks for 2021, not solely due to forward return expectations, but from a trading confidence standpoint as well. The fundamentals guide the long-term potential returns, and the fundamentals have improved, even as the stock has come under pressure post delivering strong Q2 2021 results. (Apple reports 1 quarter ahead). Our trading regiment suggests that should our entries not prove optimal, our time for the trade need only be extended, which is what the recent history provides and the long-term fundamentals validate i.e. confidently trading.

Research Report Excerpt #3

“There can be growing companies that are cheap and cheap companies that grow, so value and growth are not in opposition,” says equity portfolio manager Martin Romo. “We are in a target rich environment, and there are opportunities to invest in fast growing companies as well as classic cyclical companies.”

The chart above is yet another relative performance ratio chart. This time it is the semiconductor ETF (SMH) relative to the S&P 500 ETF (SPY). We touched on the chart during our weekly State of the Market video and as an update, the ratio ended the week just above it’s 200-DMA, with a minor improvement from Thursday. To emphasize thinking long-term, but acting on local price weakness, Finom Group believes this is another way to express such a belief by way of the largest technology component. While the chart suggests that semiconductors are likely to continue to underperform the S&P 500 near-term, the technicals only inform of the past and the developing situation. Anything can happen in the coming week to throw the chart off-track.

I view semiconductors as the single most important innovation of our generation. Semiconductors have become central to telecommunications, the internet, data analysis, artificial intelligence, cars, and physical products of all kinds. Since about 1965, the computing power of semiconductors has doubled about once every 18 months – 2 years, so-called Moore’s law. We’re now into cosmic measurements. And that’s why it’s impacting almost everything we do. As World War II was a leap forward in mass production, COVID, I think, is a leap forward in the capabilities of the semiconductor.

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