That was a messy tape and not just because of the selling the last 2 hours. Even with the market at days highs, including the Nazzy up 10pts in which the underlying ‘messy’ was visable. At that point the Nazzy was supported by everything non- tech and if you look further, you saw every momo play from our list and others lagging, if not just simply for sale.
Clearly, the CSCO effect is catching on and the market is uneasy ahead of tech earnings later this week. Worse is it may be spreading to non-related peers in tech/internet momo land as evident in the Shadowlist. Here, we’re talking about the NFLX/GOOG/AMZN/PCLN/FFIV/VMW etc. types. Some of this weakness was downgrade related, some just little competition related issues, but all in all it doesn’t seem to bode well as none of these leaders could shake off these little nuisances. A reader sent in this link in which one of the most respected tech analysts talks about the CSCO issues laid out here last week. (notably ahead by 1 month). This is the first time we’ve seen DJIM’s concerns echoed (listen to first part of clip).
http://www.cnbc.com/id/15840232/?video=1645579587&play=1. (Tuesday, FFIV has an analyst day, hopefully as far as it’s concerned it’s a CSCO specific issue and they are taking some business away). If HF liquidation comes this year, it is clearly this segment that will be rinsed as this is the big winner area. Away from these underlying concerns, we lost another Shadow play in BUCY, but would have liked to see better reaction in the broader market to this M&A activity and others today.
The 20MA is very likely to be dented soon and DJIM we’ll get the wash we wanted post CSCO to a gap in the 1180-1188 level, which would make for a ~4% correction at 1180 from recent intraday highs.