Nasdaq Shows Signs of Fatigue as Cyclicals Gain

The Nasdaq-100 has led the broader market since early June, but now the tech-heavy index is showing signs of fatigue.

First, consider its falling MACD over the last four weeks. That’s occurred as the index struggles around 15,000, a sign of bearish momentum developing.

Second is the waning relative strength versus the S&P 500. NDX is starting to lag at the same time cyclicals like financials and industrials start to gain. That suggests money could be shifting back toward “value” and away from “growth.” This pendulum has swung a few times in the last year. Now could also be a logical time for it to happen again because bond yields are rising and Big Tech earnings have passed.

Speaking of Big Tech earnings, several major NDX members suffered technical damage in their last quarterly results. Amazon.com and Facebook gapped lower (and have yet to recover). Netflix is flying a potential bearish flag. Even Apple failed to break out on a stellar quarter.

Overall NDX isn’t explicitly bearish, but investors may be getting ready for another rotation back toward smaller and more cyclical stocks. Big growth names could get sold to make room for financials and industrials.

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