Ugly Week Hits Tech Hardest

Last week, we saw a downside bias where financials and housing were the weakest area. This week shows no reprieve from the selling (click to enlarge):

A full 90% of my list is showing a loss, with the only real gains coming from precious metals. A few groups like bonds, utilities, oil and consumer staples are holding near breakeven, but none are showing meaningful gains.

A look to the bottom of the chart hints to the severity of the selling as the "smallest" losses shown are still greater than 6%. Digging into the data shows that a quarter of the funds are down at least 5% and more than half my list shows of loss of at least 3%.

Aside from the consistency of the losses, the funds on the bottom half of the chart also shares another similarity. With the exception of housing, all of the ETFs could be lumped under the broad umbrella of technology. The Internet HOLDRS (HHH), the iShares GS Networking (IGN), and the iShares GS Software (IGV) were all lower, which helps explain why general tech-related funds such as the NASDAQ 100 Trust (QQQQ) were hurt.

The weakness in technology marks a change in behavior for that area of the market. In fact, in last week's column we saw the QQQQ make an appearance on the top half of the list in a sign of relative strength. For the most part, technology has been somewhat immune from selling pressure recently, but that was clearly not the case this week.

One of the points to watch next week will be the daily chart below of the NASDAQ 100 Trust. This week's plunge has brought the QQQQ back to the mid-July peak near 50. According to technical analysis theory, prior resistance is viewed as support once penetrated. In other words, this is a spot you might expect to see buyers step into the market. The reaction here should give us a hint as to how skittish the Street is:

Comments

[User 121847:]

useless article

2007 Nov 11 01:10 AM

[Sr. Pessimist:]

I think the future of tech is not the delivery of a full-featured software product or the ongoing supplying of a software service. I think customized software development on a per-customer basis to aid them in producing their primary product is the future of software. Software alone isn't much. I very much question advertisement revenue.

2007 Nov 11 09:55 AM