Mercifully, the third quarter finally came to a close Friday. It was the worst quarter for the stock market since the credit crisis of 2008. During the last three months, investors witnessed the first-ever downgrade of United States' debt and the near-collapse of the European financial system. As we move (cautiously) into the fourth quarter, I want to draw attention to two oversold asset classes: tech stocks and gold.
The tech-heavy Nasdaq (NASDAQ:QQQ) declined 3% last week, compared with a loss of only .44% for the S&P 500 (NYSEARCA:SPY) and a gain of 1.5% for the Dow. This dismal five-day stretch for tech stocks puts the Nasdaq's total losses for the quarter at 13%. Although the S&P 500 posted a larger quarterly loss (nearly 14.5%), the Nasdaq appears far more oversold in relation to 14-day high-low ranges. The Williams R% indicator reads -99.86 for the Nasdaq and only -83.80 for the S&P. Readings from -80 to -100 are generally considered signals of an oversold market. A quick look at the Williams R% indicators for several tech bellwethers paints a similar picture. Google's (NASDAQ:GOOG) WmR%(14) is -96.05, Apple's (NASDAQ:AAPL) number is -97.49, and Amazon's (NASDAQ:AMZN) reading is -95.79. With many tech companies reporting earnings in October, I wouldn't want to get caught short if a blow-out quarter from Apple or Google ignites a tech rally.
After reaching a high of over $1900 per ounce, gold has sold-off sharply of late, falling to around $1600. While I have been a gold bear for months, I now believe investors should consider the possibility that gold is closing-in on a near-term bottom. Prices have fallen back to earth recently after speculation drove the yellow metal to parity with the much rarer platinum. The WmR% (14) for the SPDR Gold Trust ETF (NYSEARCA:GLD) is at -84.73 suggesting prices could drop a bit more before putting in a bottom. Nonetheless, I would be a buyer of gold to start the third quarter--I believe a near-term bounce is imminent.
While anxiety over the European debt-crisis will likely continue to weigh on markets, tech stocks and gold are two investments that appear ripe for a rally. It might be wise to buy the QQQ on Monday and the GLD at the first sign of further deterioration in the price of precious metals.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GLD, QQQ over the next 72 hours.