Daily Alert – Friday 4th September 2020: US tech stocks routed on Softbank activity

Mark NugentDaily Alert, Sept 2020

Daily Alert – Friday 4th September 2020: US tech stocks routed on Softbank activity

Hot on the heels of the best August in 30 years for US equities, the major move of this week has been a huge sell-off in US tech stocks yesterday and today. At the time of writing (1700 BST), the Nasdaq is down around 7% with the S&P500 and Dow30 doing slightly better with losses around 5%. The concern driving the sell-off is the possibility that the recent moves up have not reflected wider investor sentiment but have been caused by colossal purchases of tech derivatives by SoftBank. Although the Covid-19 crisis has been good for the tech firms’ profitability, stock prices have clearly become overblown.

More broadly across the week, risk sentiment was indecisive Monday through Wednesday before becoming risk-off yesterday and today. US equity indices and most others were up on the week by the Wednesday close. However, we are now looking at bearish candles on the weekly charts. WTI spot has moved down to under USD40/bbl. GOLD has declined to significant support which is a nice long setup for next week.

Interestingly, the JPY has not fully reflecting risk-off sentiment showing that the concern is probably limited to US stocks and other global indices by reflection. The JPY did rise yesterday but is flat today despite the continuing drop in US equities and risk-off sentiment. Commodity currencies are not acting in concert with the AUD down, NZD flat and CAD up on the weekly charts. The EUR is heading for its third successive down week despite the ECB saying yesterday that they are concerned about Euro appreciation.

I did not trade this week due to the indecisive risk sentiment at the start of the week. Trade of the week clearly was to short US equities but my bias on equities is long (for fundamental reasons). This used to cause me tremendous FOMO (fear of missing out) but I rationalised it as not really missing out as I can use the price drop to go long at better pricing when the fundamentals, sentiment and technicals all add up coherently. So, it’s a timing issue which, after all, is what trading is, as opposed to investing. Remember, psychological self-management is the key to trading. The rest is just pushing buttons.

Have a great weekend. I’ll be back on Monday.

VIP Club members can get the final powerpoint HERE under the “Videos” tab.
The Performance Report for August and year-to-date is HERE