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RoboStreet – September 26, 2019
Tech Sector Setting Up for Earnings Season Rally
Without question the most compelling sector to own going into the fourth quarter from a historical standpoint is technology. Business spending on technology tends to be weighted at the end of the third quarter when company’s budgets are in a “use it or lose it” mode plus there is year-end and front-loading of inventory building for the production year ahead. It’s just how the business cycle works regarding the tech sector.
Lately, the market narrative has been swinging back and forth from the economy is going to do a soft landing and resume a higher growth rate in 2020, or better to rotate into defensive sectors like utilities, consumer staples and REITs so as to prepare for inevitable recession in the U.S. I’m of the view that against the most recent band of data points, the domestic economy is on good footing, as is the stock market.
“I’m investing my own money in each and every stock as my AI platform identifies.”
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
While the market, and the for purposes of this column, the Nasdaq will not test the August low. The Invesco QQQ Trust Series ETF (QQQ), which owns the top 100 stocks in the Nasdaq, is a good vehicle of how to invest in the best tech stocks as a basket. Current, shares of QQQ are trading at $189 and the August low bounced between $182-$184. But from the chart below, the Q’s are in the midst of a retest that is being led lower by stiff selling in high-PE software and FAANG stocks that led the Nasdaq during the first half of 2019. Leadership has now shifted to the semiconductor sector.
The rotation within the broader tech sector into the chip stocks is actually highly constructive in that a rally in the chip space is typically a leading indicator for a pickup in overall economic activity. So, investors should welcome this hard shift into what is considered an economically cyclical space. The move defies the logic of a global slowdown unless the bearish narrative is overdone and a resumption of global growth can be argued for starting in mid-2020. The market tries to price in what the economy will look like six to nine months out and one could easily agree that this position is not widely held within the investment community.
So, what might be the catalyst that sparks a new and powerful rally in the tech-led Nasdaq and QQQs? Quite simply, a trade deal between the U.S. and China that involves terms and conditions on the theft and forced transfer of intellectual property and technology patents. Without some level of agreement in this vital area on the ongoing negotiations, there will be no deal and China’s economy will continue to contract at a hefty pace.
China really does need to do a deal to avert a protracted slowdown, and against the latest round of soft data, they just might be ready to do deal the U.S. can agree to. If so, the stock market will be poised for a year-end rally fueled by a trade deal, third-quarter earnings, more upbeat consumer data regarding retail, strong housing data and the assumption that the Fed will cut the Fed Funds Rate once more in December.
The rally should be led by the tech sector and the QQQ’s where the prior all-time high of $195.55 should be challenged and cleared. For investors wanting to know and get in on that trade, I highly recommend joining my Tradespoon RoboInvestor stock and ETF advisory service. My AI-driven trading platform will get us in the Qs at the right time and at the right price. Even better, once we’re long the Q’s, my AI tools will determine when we should exit that trade.
Recent volatility has shaken out many investors and the negative tone from the financial media has only exacerbated the level of nervousness. With that said, RoboInvestor subscribers have made solid profits in many of the defensive stocks this summer like Coca Cola (KO), Dominion Energy (D), FirstEnergy Corp. (FE) and Walmart Inc. (WMT), to name a few.
But now, it might be time to shift back into economically sensitive stocks and ETFs and following the lead and timing of my AI-sourced recommendations have resulted in a win rate of over 87% of closed trades being profitable. That’s unheard of and I’ll put that record up against any other. Join RoboInvestor today and get locked and loaded for what could be a historic run for the tech sector the final months of 2019. I’ll have two new recommendations coming out this weekend that you’ll definitely want to get in on.
“I’m investing my own money in each and every stock as my AI platform identifies.”And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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