The Mood in Growth Stocks Seems to Brighten

Naysayers Hapless as Worst-Case Scenarios Prove Elusive

After months of negativity, sentiment may be brightening in technology stocks and the Nasdaq-100.

As covered on Market Insights, these “growth” oriented parts of the market lost their mojo late in the summer and then led a selloff in October. But some potential positives have emerged recently.

First, chart watchers may notice that the Nasdaq-100 made a higher low on Monday than it did in mid-November. Other indexes like the S&P 500 and Dow Jones Industrial Average made lower lows over the same time frame.

Second, a few key oscillators are more positive on the Nasdaq. Of the three benchmarks, it’s the only one with positive moving average convergence/divergence (MACD). Nasdaq also has higher readings for momentum and RSI.

Internals on the Nasdaq-100 have also been improving. At least that was the verdict when I loaded its members into RadarScreen. Do you know more than half the Nasdaq’s constituents outpaced the S&P 500 in the last week and month?

Nasdaq-100 showing higher low, plus relative strength and MACD indicators.

Meanwhile, value stocks like financials and industrials have started to lag badly. Those facts suggests money is shifting back to the old leadership areas: Technology, the Nasdaq and “growth.” Whatever term you want to use, they’re all pretty much the same thing.

Of course, trade worries involving China remain an issue — especially for Apple (AAPL) and the semiconductors. But aside from that uncertainty, some indicators on TradeStation have started looking more positive for this group. Given the importance of growth stocks and tech in the overall market, traders may want to know the tide may be starting to turn.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.